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Identifier to cite or link to this item: https://hdl.handle.net/10086/13506

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Title
GARCH Options in Incomplete Markets
Creator
Creator Name
Barone-Adesi, Giovanni Barone-Adesi, Giovanni
Affiliation
Affiliation Name
University of Lugano
Creator Name
Engle, Robert Engle, Robert
Affiliation
Affiliation Name
New York University
Creator Name
Mancini, Loriano Mancini, Loriano
Affiliation
Affiliation Name
University of Lugano
Editor
Contributor Name
Center for Economic Institutions, Institute of Economic Research, Hitotsubashi University
Abstract
We propose a new method to compute option prices based on GARCH models. In an incomplete market framework, we allow for the volatility of asset return to differ from the volatility of the pricing process and obtain adequate pricing results. We investigate the pricing performance of this approach over short and long time horizons by calibrating theoretical option prices under the Asymmetric GARCH model on S&P 500 market option prices. A new simplified scheme for delta hedging is proposed.
Description
First Version: March 2004; Revised: October 2004
Publisher
Institute of Economic Research, Hitotsubashi University
Issued Date
2006-03
Language
English(eng)
Resource Type
technical report
Version Type
VoR
Is Part OfRelation -
Related Title
CEI Working Paper Series ; No. 2005-12
Relation
Related Identifier
URI
  http://cei.ier.hit-u.ac.jp/index.html
NCID
AA11590659
Number of Pages
37
Edition
Revised
Appears in Collections
CEI Working Paper Series
URL
https://hdl.handle.net/10086/13506