## A Closed-form GARCH Option Pricing Model |

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500 index options 90 days asset returns Assumption Bank of Atlanta Black-Scholes formula Black-Scholes model call option characteristic function closed-form solution compute out-of-sample conditional variance continuous time stochastic correlation between returns criterion function dynamics Empirical analysis equation Federal Reserve Bank GARCH model GARCH Option Pricing GARCH process h(t+A h(t+l Heston history of asset i=l i=l in-sample estimates index levels index options market intraday data invariant parameters ln(K log(S(t logarithm market option prices moneyness and maturity number of observations option formula Option Pricing Model options data out-of-sample prices out-of-the-money parameter estimates percentage pricing errors previous trading day Proposition put-call parity recursively risk neutral distribution risk-neutral probabilities RMSE Rubinstein Saikat Nandi Sailesh Ramamurtie Shrikhande six months skewness parameter solution for option spot asset price spot price spot returns squared errors stochastic volatility models Strike prices sum of squared Total number updated version variance process volatility is estimated Wednesday zero