Univariate and multivariate GARCH models applied to bitcoin futures option pricing

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Authors

Venter, Pierre Johan
Mare, Eben

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Publisher

MDPI

Abstract

In this paper, the Heston–Nandi futures option pricing model is applied to Bitcoin futures options. The model prices are compared to market prices to give an indication of the pricing performance. In addition, a multivariate Bitcoin futures option pricing methodology based on a multivatiate GARCH model is developed. The empirical results show that a symmetric model is a better fit when applied to Bitcoin futures returns, and also produces more accurate option prices compared to market prices for two out of three expiry dates considered.

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Keywords

Bitcoin, Futures options, Multivariate, Generalized autoregressive conditional heteroskedasticity (GARCH)

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Citation

Venter, Pierre J., and Eben Maré. 2021. Univariate and Multivariate GARCH Models Applied to Bitcoin Futures Option Pricing. Journal of Risk and Financial Management 14: 261. https://DOI.org/ 10.3390/jrfm14060261.