Collateralised option pricing in a South African context : a univariate GARCH approach
Loading...
Date
Authors
Venter, Pierre J.
Levendis, Alexis Jacques
Mare, Eben
Journal Title
Journal ISSN
Volume Title
Publisher
Taylor and Francis
Abstract
In this paper, the generalised autoregressive heteroskedasticity (GARCH)
model is applied to the pricing of collateralised options in the South African equity
market. Symmetric GARCH and nonlinear asymmetric GARCH (AGARCH) models are
considered. The models are used to price fully collateralised and zero collateral options
(European, Asian, and lookback options). The effect of collateral is illustrated by the
difference between zero collateral and fully collateralised option price surfaces. Finally,
the effect of asymmetry is shown by the difference between the symmetric and
asymmetric GARCH option price surfaces.
Description
Keywords
Option pricing, Collateral, Exotic options, Generalised autoregressive heteroskedasticity (GARCH)
Sustainable Development Goals
Citation
Pierre J Venter, Alexis Levendis & Eben Mare (2022) Collateralised option
pricing in a South African context: A Univariate GARCH approach, Cogent Economics & Finance, 10:1, 2106631, DOI: 10.1080/23322039.2022.2106631.