Pricing of options under different volatility models
AbstractIn this paper we compare the price of an option with one year maturity of the German stock index DAX for several volatility models including long memory and leverage effects. We compute the price by applying a present value scheme as well as the Black-Scholes and Hull-White formulas which includes stochastic volatility. We find that long memory as well as asymmetry affect the Black-Scholes price significantly whereas the Hull-White price is hardly affected by long memory but still by including asymmetries. --
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Bibliographic InfoPaper provided by Technische Universität Dortmund, Sonderforschungsbereich 475: Komplexitätsreduktion in multivariaten Datenstrukturen in its series Technical Reports with number 2004,62.
Date of creation: 2004
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Option Pricing; GARCH; Long Memory; Leverage Effect;
Find related papers by JEL classification:
- C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models
- C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection
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