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主讲人 |
童晨 |
简介 |
<p>It is well known that realized measures of volatility, which are computed from high frequency intraday data, provide accurate measurements of the latent volatility process. This paper investigates the role of realized volatility in pricing VIX option, which is a popular tool that enables investors to trade volatility directly. We consider both the Generalized Affine Realized Volatility model (GARV) and the Realized GARCH model, to model the joint dynamics of underlying S&P 500 index and realized volatility. A closed-form VIX option price for the GARV model is developed via Fourier inverse transformation. The Realized GARCH is a log-linear and non-affine model, therefore we introduce a novel approximation method to derive its analytical pricing formula. The newly proposed method is fast with a high degree of accuracy. Our empirical results show that models with realized volatility significantly outperform conventional GARCH-type models based on daily returns only. Among these, the Realized GARCH model provides the best pricing performance due to its less constraints and a more flexible modeling structure. Our results hold both in-sample and out-of-sample.</p> |
