Please use this identifier to cite or link to this item: https://doi.org/10.1142/S0219024909005269
Title: Convergence speed of garch option price to diffusion option price
Authors: Duan, J.-C. 
Wang, Y.
Zou, J.
Keywords: Convergence rate
European option
Stochastic volatility
Issue Date: 2009
Source: Duan, J.-C.,Wang, Y.,Zou, J. (2009). Convergence speed of garch option price to diffusion option price. International Journal of Theoretical and Applied Finance 12 (3) : 359-391. ScholarBank@NUS Repository. https://doi.org/10.1142/S0219024909005269
Abstract: 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. © 2009 World Scientific Publishing Company.
Source Title: International Journal of Theoretical and Applied Finance
URI: http://scholarbank.nus.edu.sg/handle/10635/44420
ISSN: 02190249
DOI: 10.1142/S0219024909005269
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