APPLICATION AND COMPARISON BETWEEN MERTON AND GARCH OPTION MODEL FOR BARRIER OPTION IN INDONESIA STOCK EXCHANGE

The purpose of this research is to compare the accuracy of Merton Option Model and GARCH option models for Barrrier Option utilizing data from Astra, BCA, Indofood and Telkom at the Indonesian Stock Exchange. The intraday stock return of Astra, BCA, Indofood and Telkom exhibits an overwhelming prese...

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Main Author: Riko Hendrawan
Format: Article
Language:English
Published: Social Sciences Research Society 2011-01-01
Series:International Journal of Economics and Finance Studies
Online Access:http://www.sobiad.org/eJOURNALS/journal_IJEF/archieves/2011_1/16riko_Hendrawan.pdf
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spelling doaj-b731d9992b644759b002da04e248af992020-11-24T23:58:08ZengSocial Sciences Research SocietyInternational Journal of Economics and Finance Studies1309-80551309-80552011-01-01312011030116APPLICATION AND COMPARISON BETWEEN MERTON AND GARCH OPTION MODEL FOR BARRIER OPTION IN INDONESIA STOCK EXCHANGERiko HendrawanThe purpose of this research is to compare the accuracy of Merton Option Model and GARCH option models for Barrrier Option utilizing data from Astra, BCA, Indofood and Telkom at the Indonesian Stock Exchange. The intraday stock return of Astra, BCA, Indofood and Telkom exhibits an overwhelming presence of volatility clustering, suggesting that GARCH model has an effect which best corresponds with the actual price. The best model is constructed using ARIMA model and the best lag in GARCH model is extracted. The finding from this research show that by comparing the average percentage mean squared errors of the GARCH Option Model and the Merton Option Model , the former was found more accurate than the latter. GARCH Model relatively improves average percentage mean squared errors of Merton Model ; one month option shows fourty six point ninty six percent improvement, two month option shows fifty seventh point twenty two percent and three month option shows twenty three point twenty sevent percent.http://www.sobiad.org/eJOURNALS/journal_IJEF/archieves/2011_1/16riko_Hendrawan.pdf
collection DOAJ
language English
format Article
sources DOAJ
author Riko Hendrawan
spellingShingle Riko Hendrawan
APPLICATION AND COMPARISON BETWEEN MERTON AND GARCH OPTION MODEL FOR BARRIER OPTION IN INDONESIA STOCK EXCHANGE
International Journal of Economics and Finance Studies
author_facet Riko Hendrawan
author_sort Riko Hendrawan
title APPLICATION AND COMPARISON BETWEEN MERTON AND GARCH OPTION MODEL FOR BARRIER OPTION IN INDONESIA STOCK EXCHANGE
title_short APPLICATION AND COMPARISON BETWEEN MERTON AND GARCH OPTION MODEL FOR BARRIER OPTION IN INDONESIA STOCK EXCHANGE
title_full APPLICATION AND COMPARISON BETWEEN MERTON AND GARCH OPTION MODEL FOR BARRIER OPTION IN INDONESIA STOCK EXCHANGE
title_fullStr APPLICATION AND COMPARISON BETWEEN MERTON AND GARCH OPTION MODEL FOR BARRIER OPTION IN INDONESIA STOCK EXCHANGE
title_full_unstemmed APPLICATION AND COMPARISON BETWEEN MERTON AND GARCH OPTION MODEL FOR BARRIER OPTION IN INDONESIA STOCK EXCHANGE
title_sort application and comparison between merton and garch option model for barrier option in indonesia stock exchange
publisher Social Sciences Research Society
series International Journal of Economics and Finance Studies
issn 1309-8055
1309-8055
publishDate 2011-01-01
description The purpose of this research is to compare the accuracy of Merton Option Model and GARCH option models for Barrrier Option utilizing data from Astra, BCA, Indofood and Telkom at the Indonesian Stock Exchange. The intraday stock return of Astra, BCA, Indofood and Telkom exhibits an overwhelming presence of volatility clustering, suggesting that GARCH model has an effect which best corresponds with the actual price. The best model is constructed using ARIMA model and the best lag in GARCH model is extracted. The finding from this research show that by comparing the average percentage mean squared errors of the GARCH Option Model and the Merton Option Model , the former was found more accurate than the latter. GARCH Model relatively improves average percentage mean squared errors of Merton Model ; one month option shows fourty six point ninty six percent improvement, two month option shows fifty seventh point twenty two percent and three month option shows twenty three point twenty sevent percent.
url http://www.sobiad.org/eJOURNALS/journal_IJEF/archieves/2011_1/16riko_Hendrawan.pdf
work_keys_str_mv AT rikohendrawan applicationandcomparisonbetweenmertonandgarchoptionmodelforbarrieroptioninindonesiastockexchange
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