The exploration of option pricing is of great significance to risk management and investments. One important challenge to existing research is how to describe the underlying asset price process and fluctuation features accurately. Considering the benefits of ensemble empirical mode decomposition (EEMD) in depicting the fluctuation features of financial time series, we construct an option pricing model based on the new hybrid generalized autoregressive conditional heteroskedastic (hybrid GARCH)-type functions with improved EEMD by decomposing the original return series into the high frequency, low frequency and trend terms. Using the locally risk-neutral valuation relationship (LRNVR), we obtain an equivalent martingale measure and option prices with different maturities based on Monte Carlo simulations. The empirical results indicate that this novel model can substantially capture volatility features and it performs much better than the M-GARCH and Black–Scholes models. In particular, the decomposition is consistently helpful in reducing option pricing errors, thereby proving the innovativeness and effectiveness of the hybrid GARCH option pricing model. 相似文献
This study examines the asymmetric behaviour of Bitcoin relative to six major African fiat currencies (Egyptian Pound, Cedi, ZAR, Naira, Rupee and Dinar) for the period 10 August 2015 to 31 December 2022. The time and frequency information in the time series of the currencies were captured applying the ensemble empirical mode decomposition. The quantile regression (QR) and quantile-in-quantile regression (QQR) were applied on the decomposed series to examine the connections among the currencies at different currency regimes across time. The empirical results show that both QR and QQR can adequately capture the time-varying asymmetric behaviour of the currencies across time. The results range from weak to very strong dependencies albeit both negative and positive across different quantiles. Our findings suggest that except for ZAR, Bitcoin is a viable alternative currency to African reserve currencies from the medium-term since it can hedge depreciation and forex risk of the fiat currencies. Based on the findings of this study, we recommend that forex traders and policymakers in Africa should adopt Bitcoin as an alternative currency to African currencies in the medium-term to mitigate currency crises in the continent. 相似文献
The graph plots the QR and QQR estimates in the short-term (IMF.1), medium-term (IMF.5), and long-term (IMF.Resisual). The figures helps to compare the magnitude and direction of the two estimation techniques to show the asymmetric frequency-varying dependence between exchange rates and African stock market returns.
