Article ID Journal Published Year Pages File Type
5091753 Journal of Banking & Finance 2014 26 Pages PDF
Abstract
This paper investigates how well the Hang Seng Index options, the most important class of option contracts traded in Hong Kong, are priced using the GARCH approach. We calibrated the GARCH parameters using the call and put option data and used them to price options in the subsequent weeks. We found the GARCH model performs very well in comparison with the Black-Scholes model even after allowing for a smile/smirk adjustment. Its superior performance was also evident both before and during the recent Asian financial turmoil.
Related Topics
Social Sciences and Humanities Economics, Econometrics and Finance Economics and Econometrics
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