Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
5091753 | Journal of Banking & Finance | 2014 | 26 Pages |
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
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Economics and Econometrics
Authors
Jin-Chuan Duan, Hua Zhang,