Option pricing under GARCH models with generalized hyperbolic innovations (I) : methodology.

In this paper, we present an alternative to the Black Scholes model for a discrete time economy using GARCH-type models for the underlying asset returns with Generalized Hyperbolic (GH) innovations that are potentially skewed and leptokurtic. Assuming that the stochastic discount factor is an exponential affine function of the states variables, we show that this class of distributions is stable under the Risk neutral change of probability.

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Year of publication:	2008-05
Authors:	Chorro, Christophe ; Guegan, Dominique ; Ielpo, Florian
Institutions:	Centre d'Économie de la Sorbonne, Université Paris 1 (Panthéon-Sorbonne)
Subject:	GARCH \| Generalized Hyperbolic Distribution \| pricing \| risk neutral distribution

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Extent:	application/pdf
Series:	Documents de travail du Centre d'Economie de la Sorbonne. - ISSN 1955-611X.
Type of publication:	Book / Working Paper
Language:	English
Notes:	21 pages
Classification:	C02 - Mathematical Methods ; C32 - Time-Series Models ; G13 - Contingent Pricing; Futures Pricing
Source:	RePEc - Research Papers in Economics

Persistent link: https://www.econbiz.de/10005797744