Bivariate Options Pricing with Copula-GARCH Model- Simulation Analysis

• Main Authors: Ming-Han Yu, 游明翰
• Other Authors: Yaw-Huei Wang
• Format: Others
• Language: en_US
• Published: 2009
• Online Access: http://ndltd.ncl.edu.tw/handle/45224192346235938953

碩士 === 國立臺灣大學 === 財務金融學研究所 === 97 === Bivariate option is the contingent claims derives from a pair of underlying assets. The underlying assets can be equity, commodities, foreign exchange rate, interest rate or any index with quotations. In this paper, we present a copula-GARCH model and the Monte Carlo simulation method base on the model. We examine the pricing result of three kinds of bivariate options - digital, rainbow and spread option, in many different cases and find that the choosing of pricing copula may cause a significant difference of the pricing result. Furthermore, the pricing result of rainbow option is most sensitive to the choosing of copulas in the three kinds of bivariate options.