Learning for infinitely divisible GARCH models in option pricing

2020 ◽  
Vol 0 (0) ◽  
Author(s):  
Fumin Zhu ◽  
Michele Leonardo Bianchi ◽  
Young Shin Kim ◽  
Frank J. Fabozzi ◽  
Hengyu Wu
Keyword(s):  
Option Pricing ◽  
Stock Returns ◽  
Bayesian Learning ◽  
Space Structure ◽  
Estimation Methods ◽  
Garch Models ◽  
Learning Approaches ◽  
Infinitely Divisible ◽  
Asymmetric Garch ◽  
Non Gaussian

AbstractThis paper studies the option valuation problem of non-Gaussian and asymmetric GARCH models from a state-space structure perspective. Assuming innovations following an infinitely divisible distribution, we apply different estimation methods including filtering and learning approaches. We then investigate the performance in pricing S&P 500 index short-term options after obtaining a proper change of measure. We find that the sequential Bayesian learning approach (SBLA) significantly and robustly decreases the option pricing errors. Our theoretical and empirical findings also suggest that, when stock returns are non-Gaussian distributed, their innovations under the risk-neutral measure may present more non-normality, exhibit higher volatility, and have a stronger leverage effect than under the physical measure.

Early warning signals using AVaRs of infinitely divisible GARCH models — evidence from stock index markets

2015 ◽  
Vol 47 (43) ◽  
pp. 4630-4652 ◽  
Author(s):  
Chia-Chien Chang ◽  
Te-Chung Hu ◽  
Chiu-Fen Kao ◽  
Ya-Chi Chang
Keyword(s):  
Early Warning ◽  
Stock Index ◽  
Garch Models ◽  
Infinitely Divisible ◽  
Warning Signals ◽  
Early Warning Signals

scholarly journals Tempered stable and tempered infinitely divisible GARCH models

2010 ◽  
Vol 34 (9) ◽  
pp. 2096-2109 ◽  
Author(s):  
Young Shin Kim ◽  
Svetlozar T. Rachev ◽  
Michele Leonardo Bianchi ◽  
Frank J. Fabozzi
Keyword(s):  
Garch Models ◽  
Infinitely Divisible

scholarly journals Infinitely Divisible Distributions in Integer-Valued Garch Models

2015 ◽  
Vol 36 (4) ◽  
pp. 503-527 ◽  
Author(s):  
E. Gonçalves ◽  
N. Mendes-Lopes ◽  
F. Silva
Keyword(s):  
Garch Models ◽  
Infinitely Divisible Distributions ◽  
Infinitely Divisible

Full versus quasi MLE for ARMA-GARCH models with infinitely divisible innovations

2015 ◽  
Vol 47 (48) ◽  
pp. 5147-5158 ◽  
Author(s):  
Jimmie Goode ◽  
Young Shin Kim ◽  
Frank J. Fabozzi
Keyword(s):  
Garch Models ◽  
Infinitely Divisible
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