Pricing options under generalized GARCH and stochastic volatility processes

• 成果类型: Article
• 署名作者: Ritchken, P; Trevor, R
• 署名单位: University System of Ohio; Case Western Reserve University; Macquarie University
• 刊物名称: JOURNAL OF FINANCE
• ISSN/ISSBN: 0022-1082
• DOI: 10.1111/0022-1082.00109
• 发表日期: 1999
• 页码: 377-402
• 关键词: conditional heteroskedasticity; ARCH models; valuation; claims; bond

摘要

In this paper, we develop an efficient lattice algorithm to price European and American options under discrete time GARCH processes. We show that this algorithm is easily extended to price options under generalized GARCH processes, with many of the existing stochastic volatility bivariate diffusion models appearing as limiting cases. We establish one unifying algorithm that can price options under almost all existing GARCH specifications as well as under a large family of bivariate diffusions in which volatility follows its own, perhaps correlated, process.