Advertisement

Forecasting Volatility and Option Pricing with GARCH Models

  • Jürgen Kähler
Conference paper

Abstract

In this paper I will explore the applicability of GARCH (generalized autoregressive conditional heteroskedasticity) models to the modelling of volatility in financial markets. More specifically, I will examine the forecasting performance of GARCH models for the volatility of foreign exchange rates and study the implications of these models for option pricing.

Preview

Unable to display preview. Download preview PDF.

Unable to display preview. Download preview PDF.

References

  1. Biger, N. and J. Hull (1983): “The Valuation of Currency Options”, Financial Management, 12, 24-28.Google Scholar
  2. Black, F. and M. Scholes (1973): “The Pricing of Options and Corporate Liabilities”, Journal of Political Economy, 81, 637–654.CrossRefGoogle Scholar
  3. Bollerslev, T. (1986): “Generalized Autoregressive Conditional Heteroskedasticity”, Journal of Econometrics, 31, 307–327.CrossRefGoogle Scholar
  4. Duan, J.-c. (1991): “The GARCH Option Pricing Model”, McGill University, Faculty of Management, mimeo.Google Scholar
  5. Merton, R. C. (1976): “Option Pricing When Underlying S tack Returns are Discontinuous”, Journal of Financial Economics, 3, 125–144.CrossRefGoogle Scholar

Copyright information

© Springer-Verlag Berlin Heidelberg 1993

Authors and Affiliations

  • Jürgen Kähler
    • 1
  1. 1.Zentrum für Europäische Wirtschaftsforschung (ZEW)Mannheim 1Germany

Personalised recommendations