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Estimation of market prices of risks in the GARCH diffusion model

文献类型：期刊论文

作者Wu, Xinyu1; Zhou, Hailin1; Wang, Shouyang2
刊名ECONOMIC RESEARCH-EKONOMSKA ISTRAZIVANJA
出版日期2018-01-15
卷号31期号:1页码:15-36
关键词Market prices of risks GARCH diffusion model option pricing efficient importance sampling maximum likelihood particle filter
ISSN号1331-677X
DOI10.1080/1331677X.2017.1421989
英文摘要In this paper we propose an estimation procedure which uses joint data on the underlying asset and option prices to extract market prices of return and volatility risks in the context of the G.A.R.C.H. diffusion model. The procedure is flexible and simple to implement. Firstly, a quasi-closed form pricing formula for European options in the G.A.R.C.H. diffusion model is derived. This result greatly eases the computational burden for computing option prices, and well suited for our model estimation. Then, based upon the joint data, we develop an efficient importance sampling-based maximum likelihood (E.I.S.-M.L.) estimation method for the objective and risk-neutral parameters of the G.A.R.C.H. diffusion model and a particle filter algorithm for latent state variable. Hence, this allows us to infer the market prices of risks that link the objective measure and the risk-neutral measure. Finally, we illustrate our approach using actual data on the Hang Seng Index (H.S.I.) and index warrant prices. The results show that both the return and volatility risks are priced by the market. Moreover, an option pricing study demonstrates that the market price of the volatility risk plays an important role in fitting option prices.
资助项目National Natural Science Foundation of China[71501001] ; National Natural Science Foundation of China[71101001] ; M.O.E. (Ministry of Education in China) Project of Humanities and Social Sciences[14YJC790133] ; China Postdoctoral Science Foundation[2015M580416] ; Natural Science Foundation of Anhui Province of China[1408085QG139] ; Anhui Province College Excellent Young Talents Fund of China[2013SQRW025ZD]
WOS研究方向Business & Economics
语种英语
WOS记录号WOS:000423620300002
出版者ROUTLEDGE JOURNALS, TAYLOR & FRANCIS LTD
源URL[http://ir.amss.ac.cn/handle/2S8OKBNM/29502]  
专题系统科学研究所
通讯作者Wu, Xinyu
作者单位1.Anhui Univ Finance & Econ, Sch Finance, Bengbu, Peoples R China
2.Chinese Acad Sci, Acad Math & Syst Sci, Beijing, Peoples R China
推荐引用方式
GB/T 7714		 Wu, Xinyu,Zhou, Hailin,Wang, Shouyang. Estimation of market prices of risks in the GARCH diffusion model[J]. ECONOMIC RESEARCH-EKONOMSKA ISTRAZIVANJA,2018,31(1):15-36.
APA Wu, Xinyu,Zhou, Hailin,&Wang, Shouyang.(2018).Estimation of market prices of risks in the GARCH diffusion model.ECONOMIC RESEARCH-EKONOMSKA ISTRAZIVANJA,31(1),15-36.
MLA Wu, Xinyu,et al."Estimation of market prices of risks in the GARCH diffusion model".ECONOMIC RESEARCH-EKONOMSKA ISTRAZIVANJA 31.1(2018):15-36.

入库方式： OAI收割

来源：数学与系统科学研究院

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