GARCH option pricing models with Meixner innovations

GARCH option pricing models with Meixner innovations

The paper presents GARCH option pricing models with Meixner-distributed innovations. The risk-neutral dynamics are derived by means of the conditional Esscher transform. Assessing the option pricing performance both in-sample and out-of-sample, we find that the models compare favorably against the b...

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Veröffentlicht in:Review of derivatives research 2018-10, Vol.21 (3), p.277-305
Hauptverfasser: Fengler, Matthias R., Melnikov, Alexander
Format: Artikel
Sprache:eng
Schlagworte:
Benchmarks
Derivatives
Economics and Finance
Finance
Investments and Securities
Securities prices
Simulation
Stochastic models
Studies
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Zusammenfassung:The paper presents GARCH option pricing models with Meixner-distributed innovations. The risk-neutral dynamics are derived by means of the conditional Esscher transform. Assessing the option pricing performance both in-sample and out-of-sample, we find that the models compare favorably against the benchmark models. Simulations suggest that the driver of these results is the impact of conditional skewness and conditional excess kurtosis on option prices.
ISSN:1380-6645
1573-7144
DOI:10.1007/s11147-017-9141-7