https://scholars.lib.ntu.edu.tw/handle/123456789/117045
標題: | On Accurate and Provably Efficient GARCH Option Pricing Algorithms | 作者: | Lyuu, Yuh-Dauh Wu, Chi-Ning |
關鍵字: | GARCH;trinomial tree;path dependency;option pricing;generating function | 公開日期: | 2005 | 出版社: | 臺北市:國立臺灣大學資訊工程學系 | 摘要: | The GARCH model has been very successful in capturing the serial correlation of asset return volatilities. As a result, applying the model to options pricing attracts a lot of attention. However, previous tree-based GARCH option pricing algorithms suffer from exponential running time, a cut-off maturity, inaccuracy, or some ombination thereof. Specifically, this paper proves that the popular trinomial-tree option pricing algorithms of Ritchken & Trevor (1999) & Cakici & Topyan (2000) explode exponentially when the number of partitions per day, n, exceeds a threshold determined by the GARCH parameters. Furthermore, when explosion happens, the tree cannot grow beyond a certain maturity date, making it unable to price derivatives with a longer maturity. As a result, the algorithms must be limited to using small n, which may have accuracy problems. The paper presents an alternative trinomialtree GARCH option pricing algorithm. |
URI: | http://ntur.lib.ntu.edu.tw//handle/246246/20060927122855648546 | 其他識別: | 20060927122855648546 |
顯示於: | 資訊工程學系 |
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qf2005.pdf | 445.52 kB | Adobe PDF | 檢視/開啟 |
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