A GARCH Option Pricing Model for QQQ

• Main Author: 賴雅雯
• Other Authors: Jack C. Lee
• Format: Others
• Language: en_US
• Published: 2004
• Online Access: http://ndltd.ncl.edu.tw/handle/14113129791431065880

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.