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Sobre la convergencia del modelo GARCH(1,1)-M al movimiento geométrico browniano con reversión a la media

Author

Listed:
  • Francisco Venegas Martínez

    () (IPN)

  • Francisco J. Sánchez Torres

    (IPN)

Abstract

This paper shows, under certain conditions, the convergence of the GARCH (1.1)-M model to the geometric Brownian motion with mean reversion (diffusion GARCH process). The importance from this result is that the problem of inference on the parameters of the valuation models of options with stochastic volatility can be reduced by estimating the model GARCH (1.1)-M. It is also carried out a discussion on the assumptions that ensure the existence and uniqueness of the limit process. Finally, it is provided a quick demonstration of the convergence, which is less formal, but more intuitive and easy to remember

Suggested Citation

  • Francisco Venegas Martínez & Francisco J. Sánchez Torres, 2008. "Sobre la convergencia del modelo GARCH(1,1)-M al movimiento geométrico browniano con reversión a la media," Revista de Administración, Finanzas y Economía (Journal of Management, Finance and Economics), Tecnológico de Monterrey, Campus Ciudad de México, vol. 2(2), pages 92-103.
  • Handle: RePEc:ega:rafega:200807
    as

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    File URL: http://alejandria.ccm.itesm.mx/egap/documentos/2008V2A7Venegas-Sanchez.pdf
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    References listed on IDEAS

    as
    1. Drew Fudenberg & Jean Tirole, 1991. "Game Theory," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262061414, January.
    2. Martin J. Osborne & Ariel Rubinstein, 1994. "A Course in Game Theory," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262650401, January.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Convergencia de procesos estocásticos; valuación de derivados; volatilidad estocástica;

    JEL classification:

    • G13 - Financial Economics - - General Financial Markets - - - Contingent Pricing; Futures Pricing
    • C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes

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