Option pricing for some stochastic volatility models
Abstract
Purpose
To study stochastic volatility in the pricing of options.
Design/methodology/approach
Random‐coefficient autoregressive and generalized autoregressive conditional heteroscedastic models are studied. The option‐pricing formula is viewed as a moment of a truncated normal distribution.
Findings
Kurtosis for RCA and for GARCH process is derived. Application of random coefficient GARCH kurtosis in analytical approximation of option pricing is discussed.
Originality/value
Findings are useful in financial modeling.
Keywords
Citation
Thavaneswaran, A., Singh, J. and Appadoo, S.S. (2006), "Option pricing for some stochastic volatility models", Journal of Risk Finance, Vol. 7 No. 4, pp. 425-445. https://doi.org/10.1108/15265940610688982
Publisher
:Emerald Group Publishing Limited
Copyright © 2006, Emerald Group Publishing Limited