Options valuation and calibration for leveraged exchange-traded funds with Heston–Nandi and inverse Gaussian GARCH models-Reference-Cited by-同舟云学术

Options valuation and calibration for leveraged exchange-traded funds with Heston–Nandi and inverse Gaussian GARCH models

Published:2019-09 Issue:03 Volume:06 Page:1950027
ISSN:2424-7863
Container-title:International Journal of Financial Engineering
language:en
Short-container-title:J. Finan. Eng.

Author:

Cao Hongkai¹,Chatterjee Rupak²,Cui Zhenyu³

Affiliation:

1. School of Business, Stevens Institute of Technology, Hoboken, NJ 07030, United States

2. Department of Physics and Center for Quantum Science and Engineering, Stevens Institute of Technology, Hoboken, NJ 07030, United States

3. School of Business and Center for Quantum Science and Engineering, Stevens Institute of Technology, Hoboken, NJ 07030, United States

Abstract

Leveraged exchange-traded funds (LETF) are newly introduced ETFs that have become increasingly popular. It closely tracks the value of an underlying index while allowing for additional leverage. In this paper, we consider the valuation of options written on LETF under two popular affine GARCH models, the Heston–Nandi model and the inverse Gaussian GARCH model. We also calibrate the two models using market data, and demonstrate the superior pricing performance.

Publisher

World Scientific Pub Co Pte Lt

Link

https://www.worldscientific.com/doi/pdf/10.1142/S2424786319500270

Reference16 articles.

1. Path-Dependence of Leveraged ETF Returns

2. Variance swaps valuation under non-affine GARCH models and their diffusion limits

3. Non-affine GARCH Option Pricing Models, Variance-Dependent Kernels, and Diffusion Limits*

4. The pricing and performance of leveraged exchange-traded funds

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