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Univariate and Multivariate GARCH Models Applied to Bitcoin Futures Option Pricing

Author

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  • Pierre J. Venter

    (Department of Actuarial Science, University of Pretoria, Private Bag X20, Hatfield 0028, South Africa
    Department of Finance and Investment Management, University of Johannesburg, P.O. Box 524, Aucklandpark 2006, South Africa
    These authors contributed equally to this work.)

  • Eben Maré

    (Department of Mathematics and Applied Mathematics, University of Pretoria, Private Bag X20, Hatfield 0028, South Africa
    These authors contributed equally to this work.)

Abstract

In this paper, the Heston–Nandi futures option pricing model is applied to Bitcoin futures options. The model prices are compared to market prices to give an indication of the pricing performance. In addition, a multivariate Bitcoin futures option pricing methodology based on a multivatiate GARCH model is developed. The empirical results show that a symmetric model is a better fit when applied to Bitcoin futures returns, and also produces more accurate option prices compared to market prices for two out of three expiry dates considered.

Suggested Citation

  • Pierre J. Venter & Eben Maré, 2021. "Univariate and Multivariate GARCH Models Applied to Bitcoin Futures Option Pricing," JRFM, MDPI, vol. 14(6), pages 1-14, June.
    • Handle: RePEc:gam:jjrfmx:v:14:y:2021:i:6:p:261-:d:572373
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    References listed on IDEAS

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    2. Tak Kuen Siu, 2024. "Bayesian Lower and Upper Estimates for Ether Option Prices with Conditional Heteroscedasticity and Model Uncertainty," JRFM, MDPI, vol. 17(10), pages 1-32, September.

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