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Article dans une revue International Journal of Applied Economics Année : 2005

GARCH option pricing under skew

Sofiane Aboura
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Résumé

This article is an empirical study dedicated to the GARCH Option pricing model of Duan (1995) applied to the FTSE 100 European style options for various maturities. We analyze the validity of the model given its ability to price one-day ahead out-of-sample call options and also its ability to capture the empirical dynamic of the volatility skew.
First, we get a severe mispricing for deep out-of-the-money and short term call options. Second, this model reveals a good ability to capture the change of regime in the implied volatility surface.
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Dates et versions

halshs-00153119, version 1 (08-06-2007)

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  • HAL Id : halshs-00153119 , version 1

Citer

Sofiane Aboura. GARCH option pricing under skew. International Journal of Applied Economics, 2005, 4 (6), pp.78-86. ⟨halshs-00153119⟩
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