English, Article edition: CONVERGENCE SPEED OF GARCH OPTION PRICE TO DIFFUSION OPTION PRICE JIN-CHUAN DUAN; YAZHEN WANG; JIAN ZOU

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Physical Description
  • article
Language
  • English

Edition details

Title
  • CONVERGENCE SPEED OF GARCH OPTION PRICE TO DIFFUSION OPTION PRICE
Author
  • JIN-CHUAN DUAN
  • YAZHEN WANG
  • JIAN ZOU
Physical Description
  • article
Notes
  • It is well known that as the time interval between two consecutive observations shrinks to zero, a properly constructed GARCH model will weakly converge to a bivariate diffusion. Naturally the European option price under the GARCH model will also converge to its bivariate diffusion counterpart. This paper investigates the convergence speed of the GARCH option price. We show that the European option prices under the two corresponding models are equal up to an order near the square root of the length of discrete time interval.
  • Convergence rate, European option, stochastic volatility
  • RePEc:wsi:ijtafx:v:12:y:2009:i:03:p:359-391
Language
  • English
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