Revaluation of Estimated Option Prices Using GARCH Processes with Most Preferable Properties

2013
Andrejs Matvejevs, Jegors Fjodorovs

In this paper we describe practical example of our studies for an analytical solution for a problem of pricing financial actives with autocorrelated returns. This example is based on option price for Tesla Motors Inc stock. In previous studies we developed a continuous diffusion model for the case of serially correlated stock returns, obtain European call option pricing formula and show that even small levels of predictability due to serial correlation can give substantial deviation from results obtained by Black-Sholes formula and made Monte Carlo simulation for stock volatility. Finally, we showed recalculated option price, based on the simulation result.

Atslēgas vārdi
Discrete time stochastic difference equation systems, GARCH models, Markov chain, Black Scholes option pricing formula.

Matvejevs, A., Fjodorovs, J. Revaluation of Estimated Option Prices Using GARCH Processes with Most Preferable Properties. Datorvadības tehnoloģijas. Nr.14, 2013, 100.-104.lpp. ISSN 2255-9108. e-ISSN 2255-9116.

Publikācijas valoda
English (en)