Option Pricing Under GARCH Models Applied to the SET50 Index of Thailand-Reference-Cited by-同舟云学术

Option Pricing Under GARCH Models Applied to the SET50 Index of Thailand

Published:2021-04-02 Issue: Volume:20 Page:112-121
ISSN:2224-2880
Container-title:WSEAS TRANSACTIONS ON MATHEMATICS
language:en
Short-container-title:

Author:

Arunsingkarat Somphorn¹,Costa Renato¹,Misran Masnita²,Phewchean Nattakorn³

Affiliation:

1. Department of Mathematics, Faculty of Science, Mahidol University, Rama 6 Rd., Bangkok 10400, Thailand

2. School of Quantitative Sciences, Uum College of Arts and Sciences, Universiti Utara Malaysia, 06010 Uum Sintok, Kedah Darul Aman, Malaysia.

3. Centre of Excellence in Mathematics, Perdo, Thailand

Abstract

Variance changes over time and depends on historical data and previous variances; as a result, it is useful to use a GARCH process to model it. In this paper, we use the notion of Conditional Esscher transform to GARCH models to find the GARCH, EGARCH and GJR risk-neutral models. Subsequently, we apply these three models to obtain option prices for the Stock Exchange of Thailand and compare to the well-known Black-Scholes model. Findings suggest that most of the pricing options under GARCH model are the nearest to the actual prices for SET50 option contracts with both times to maturity of 30 days and 60 days.

Publisher

World Scientific and Engineering Academy and Society (WSEAS)

Subject

General Mathematics

Reference17 articles.

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