期刊名称：CORE Discussion Papers / Center for Operations Research and Econometrics (UCL), Louvain
出版年度：2010
卷号：2010
期号：1
出版社：Center for Operations Research and Econometrics (UCL), Louvain
摘要：In recent years multivariate models for asset returns have received much attention, in particular
this is the case for models with time varying volatility. In this paper we consider models of this
class and examine their potential when it comes to option pricing. Specifically, we derive the risk
neutral dynamics for a general class of multivariate heteroskedastic models, and we provide a
feasible way to price options in this framework. Our framework can be used irrespective of the
assumed underlying distribution and dynamics, and it nests several important special cases. We
provide an application to options on the minimum of two indices. Our results show that not only
is correlation important for these options but so is allowing this correlation to be dynamic.
Moreover, we show that for the general model exposure to correlation risk carries an important
premium, and when this is neglected option prices are estimated with errors. Finally, we show
that when neglecting the non-Gaussian features of the data, option prices are also estimated with
large errors.
