WHICH IS BETTER: HOMOSKEDASTIS OR HETEROSKEDASTIS VOLATILITY MODEL FOR OPTION PRICING? (Test Of Black-Scholes Option Model And Garch Option Model At The Indonesian Stock Exchange)

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WHICH IS BETTER: HOMOSKEDASTIS OR HETEROSKEDASTIS VOLATILITY MODEL FOR OPTION PRICING? (Test Of Black-Scholes Option Model And Garch Option Model At The Indonesian Stock Exchange)

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Title: WHICH IS BETTER: HOMOSKEDASTIS OR HETEROSKEDASTIS VOLATILITY MODEL FOR OPTION PRICING? (Test Of Black-Scholes Option Model And Garch Option Model At The Indonesian Stock Exchange)
Author: Haruman, Tendi; Hendrawan, Riko; Sumachdar, Endang
Abstract: The purpose of this research is to compare the accuracy of Black-Scholes Option Model and GARCH option models for Stock option utilizing data from Astra, BCA, Indofood and Telkom at the Indonesian Stock Exchange. The intraday stock return of Astra, BCA, Indofood and Telkom exhibits an overwhelming presence of volatility clustering; suggesting that GARCH model has an effect which best corresponds with the actual price. The best model is constructed using ARIMA model and the best lag in GARCH model is extracted. The finding from this research show that by comparing the average percentage mean squared errors of the GARCH Option Model and the Black-Scholes Option Model, the former was found more accurate than the latter. GARCH Model relatively improves average percentage mean squared errors of Black-Scholes Model ; one month option shows a twenty eight point ten percent improvement, two month option shows twenty three point thirty percent and three month option shows twenty percent.
URI: http://repository.widyatama.ac.id/xmlui/handle/123456789/1325
Date: 2009


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