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- Title
Option Pricing under Sign RCA-GARCH Models.
- Authors
Górka, Joanna
- Abstract
After Black and Scholes's groundbreaking work, the literature concerning pricing options has become a very important area of research. Numerous option valuation methods have been developed. This paper shows how one can compute option prices using Sign RCA-GARCH models for the dynamics of the volatility. Option pricing obtained from Sign RCA-GARCH models, the Black and Scholes's valuation and other selected GARCH option pricing models are compared with the market prices. This approach was illustrated by the valuation of the European call options on the WIG20 index. The empirical results indicated that RCA-GARCH and Sign RCA-GARCH models can be successfully used for pricing options. However none of the models can be indicated as the best one for the option valuations for every period and every time to maturity of the options.
- Subjects
OPTIONS sales &; prices (Finance); MATHEMATICAL models of option; STOCK prices; MATHEMATICAL equivalence; MARKET volatility
- Publication
Dynamic Econometric Models, 2014, Vol 14, p145
- ISSN
1234-3862
- Publication type
Article
- DOI
10.12775/DEM.2014.008