A GARCH Option Pricing Model for QQQ
碩士 === 國立交通大學 === 財務金融研究所 === 92 === This thesis investigates the empirical performance of Heston-Nandi GARCH option pricing model relative to an ad hoc Black-Scholes model using QQQ call option data. The GARCH model is examined from two perspectives: (1) maximum likelihood estimation, and (2) non-l...
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| Format: | Others |
| Language: | en_US |
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2004
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| Online Access: | http://ndltd.ncl.edu.tw/handle/14113129791431065880 |
| Summary: | 碩士 === 國立交通大學 === 財務金融研究所 === 92 === This thesis investigates the empirical performance of Heston-Nandi GARCH option pricing model relative to an ad hoc Black-Scholes model using QQQ call option data. The GARCH model is examined from two perspectives: (1) maximum likelihood estimation, and (2) non-linear least square estimation. We find that the GARCH model with parameters estimated by non-linear least squares does better across all moneyness (K/S) categories, even though the ad hoc Black-Schole model updates the implied volatility by option prices. In particular, it can explain a significant part of volatility smile in out-of-money options. The improvement is largely due to the ability of the GARCH model to simultaneously capture the information of historical index series and current option prices.
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