國立臺灣大學資訊工程學系Lyuu, Yuh-DauhYuh-DauhLyuuWu, Chi-NingChi-NingWu2006-09-272018-07-052006-09-272018-07-052005http://ntur.lib.ntu.edu.tw//handle/246246/20060927122855648546The 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.application/pdf456209 bytesapplication/pdfzh-TWGARCHtrinomial treepath dependencyoption pricinggenerating functionreporthttp://ntur.lib.ntu.edu.tw/bitstream/246246/20060927122855648546/1/qf2005.pdf