IDEAS home Printed from https://ideas.repec.org/a/bla/mathfi/v5y1995i1p13-32.html
   My bibliography  Save this article

The Garch Option Pricing Model

Author

Listed:
  • Jin‐Chuan Duan

Abstract

This article develops an option pricing model and its corresponding delta formula in the context of the generalized autoregressive conditional heteroskedastic (GARCH) asset return process. the development utilizes the locally risk‐neutral valuation relationship (LRNVR). the LRNVR is shown to hold under certain combinations of preference and distribution assumptions. the GARCH option pricing model is capable of reflecting the changes in the conditional volatility of the underlying asset in a parsimonious manner. Numerical analyses suggest that the GARCH model may be able to explain some well‐documented systematic biases associated with the Black‐Scholes model.

Suggested Citation

  • Jin‐Chuan Duan, 1995. "The Garch Option Pricing Model," Mathematical Finance, Wiley Blackwell, vol. 5(1), pages 13-32, January.
    • Handle: RePEc:bla:mathfi:v:5:y:1995:i:1:p:13-32
    DOI: 10.1111/j.1467-9965.1995.tb00099.x
    as

    Download full text from publisher

    File URL: https://doi.org/10.1111/j.1467-9965.1995.tb00099.x
    Download Restriction: no
    File URL: https://libkey.io/10.1111/j.1467-9965.1995.tb00099.x?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bla:mathfi:v:5:y:1995:i:1:p:13-32. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: http://www.blackwellpublishing.com/journal.asp?ref=0960-1627 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.