TITLE:
Dynamic Option Pricing Model Based on the Realized-GARCH-NIG Approach
AUTHORS:
Honglei Zhang, Yixiang Tian, Gaoxun Zhang
KEYWORDS:
Option Pricing Model, Realized GARCH Model, High Frequency Data, NIG Distribution
JOURNAL NAME:
Open Journal of Social Sciences,
Vol.4 No.3,
March
15,
2016
ABSTRACT:
In this paper, we take
the advantage of high frequency data to develop option pricing model and select
the Realized GARCH model to describe the volatility of assets, use NIG
distribution to describe the distribution of underlying assets, and also build
the Realized-GARCH-NIG model to price the option. Finally, we obtain the
dynamic option pricing model based on the Realized-GARCH-NIG approach. To
verify the effect of the dynamic option pricing model based on the
Realized-GARCH- NIG approach, this paper provides the empirical analysis
between the dynamic option pricing model based on the Realized-GARCH-NIG
approach and the B-S option pricing model. The results show that the option
value obtained from the dynamic option pricing model based on the Realized-GARCH-NIG
approach is more accurate and effective than the B-S option pricing model.