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Warrant pricing based on GARCH diffusion model.
- Source :
-
Xitong Gongcheng Lilun yu Shijian (Systems Engineering Theory & Practice) . Mar2012, Vol. 32 Issue 3, p449-457. 9p. - Publication Year :
- 2012
-
Abstract
- In this paper, we consider the issue of warrant pricing when the underlying asset follows the GARCH diffusion model. Firstly, we develop a method for maximum likelihood (ML) estimation of the GARCH diffusion model based on the efficient importance sampling (EIS) technique. Then, taking SSE and SZSE composite indices in Chinese stock market as an example, we apply the EIS-ML method to estimate the parameters of the GARCH diffusion model, and we find that the EIS-ML method is efficient. Finally, an empirical study of Hang Seng Index warrants is presented. Empirical results show that the GARCH diffusion warrant pricing model is more accurate than the classical Black-Scholes (B-S) model. [ABSTRACT FROM AUTHOR]
- Subjects :
- *PRICING
*GARCH model
*MAXIMUM likelihood statistics
*STOCK exchanges
Subjects
Details
- Language :
- Chinese
- ISSN :
- 10006788
- Volume :
- 32
- Issue :
- 3
- Database :
- Academic Search Index
- Journal :
- Xitong Gongcheng Lilun yu Shijian (Systems Engineering Theory & Practice)
- Publication Type :
- Academic Journal
- Accession number :
- 79922618