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Journal of Statistics and Management Systems

(Since 1998)
Open Access ·Peer-reviewed·ISSN (Online): 2169-0014·ISSN (Print): 0972-0510

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Monthly Journal: Publishes peer-reviewed aticles on theoretical and applied statistics and management systems, expoloring industrial statistics, actuarial and decision sciences.

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Journal of Statistics and Management Systems
Open Access Research Article

Option valuation using Garch-type models : Empirical evidence using USD/INR data

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pp. 483–504Vol. 28Issue 3April 2025DOI: 10.47974/JSMS-1359XML
Received:
16 Jan 2024
Published Online:
08 Apr 2025
Article type:
Research Article
Language:
EN
Article no.:
JSMS-1359
Pages:
483–504

Abstract

The aim of this paper is to evaluate the option pricing performance of three GARCH-type models against the Black-Scholes model. The standard GARCH model and the asymmetric GJR-GARCH and EGARCH models are employed with the Gaussian innovation distribution. The models are assessed on two sample sets of USD/INR currency European call options data obtained from the National Stock Exchange of India. A Monte Carlo simulation approach is implemented on the estimated GARCH models for the valuation of European call options. An accuracy analysis of the option prices is then performed across different moneyness and maturity using relative loss functions. The three GARCH models performed better than the Black-Scholes model in all samples of USD/INR for all moneyness and maturity. From an overall standpoint, the GJR-GARCH model displayed the best option pricing accuracy.

Keywords

Option pricingGARCH-type modelsBlack-scholesMonte carlo simulation

Subject Classifications

62P0591G20

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