Price prediction of Asian option contracts in stocks using the Monte Carlo and volatility models

This study aims to predict the price of stock options in the future period when the underlying asset follows a Garch process and as a consideration for stock traders to make decisions to sell or buy options for a stock. GARCH Model can forecast volatility which is needed in financial applications. We select the best GARCH Model based on AIC and BIC value for the underlying stock and embedding it into the Monte Carlo scheme to derive price Asian option. We use data on ISSP to illustrate fat tail and volatility data. The result shows that the best GARCH Model for the historical data ISSP stock is ARMA-GARCH.