GARCH-type volatility in the multiplicative quadrinomial tree method: An application to real options

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dc.citation.journalTitleContaduría Y Administracióneng
dc.contributor.authorPareja, J.
dc.contributor.authorMarin-Sanchez, Freddy H.
dc.contributor.departmentUniversidad EAFIT. Escuela de Cienciasspa
dc.contributor.researchgroupModelado Matemáticospa
dc.date.accessioned2020-03-02
dc.date.accessioned2021-04-12T14:07:18Z
dc.date.available2021-04-12T14:07:18Z
dc.date.issued2020-03-03
dc.description.abstractThis article applies the multiplicative quadrinomial tree numerical method with non-constant volatility to assess a real option of abandonment, based on an estimate of the conditional volatility for WTI oil commodity prices and their respective equivalence in a GARCH-diffusion model. The methodology refers to the use of an estimate of type GARCH (1,1) and the numerical method through a quadrinomial tree. There are two main findings: 1) when employing the quadrinomial method, the value of the real option turned out to be greater than the value estimated through the traditional multiplicative binomial method, due to underestimation of the real value of volatility that occurs in a specific period according to the latter method; and 2) a methodological contribution that demonstrates plainly way the presence of non-constant conditional volatility as well as being able to value all types of options using stochastic volatility. © 2019 Universidad Nacional Autónoma de México, Facultad de Contaduría y Administración. This is an open access article under the CC BY-NC-SA (https://creativecommons.org/licenses/by-nc-sa/4.0/)eng
dc.identifierhttps://eafit.fundanetsuite.com/Publicaciones/ProdCientif/PublicacionFrw.aspx?id=10310
dc.identifier.doi10.22201/fca.24488410e.2021.2331
dc.identifier.issn01861042
dc.identifier.otherSCOPUS;2-s2.0-85099822392
dc.identifier.urihttp://hdl.handle.net/10784/27821
dc.language.isospaeng
dc.publisherUniversidad Nacional Autonoma de Mexico
dc.relation.urihttps://www.scopus.com/inward/record.uri?eid=2-s2.0-85099822392&doi=10.22201%2ffca.24488410e.2021.2331&partnerID=40&md5=0e2dbf011b4f1c7cce8e23768a425d4a
dc.rightshttps://v2.sherpa.ac.uk/id/publication/issn/0186-1042
dc.sourceContaduría Y Administración
dc.subject.keywordGARCHeng
dc.subject.keywordGARCH-diffusion modeleng
dc.subject.keywordOption pricingeng
dc.subject.keywordQuadrinomial treeseng
dc.subject.keywordTime serieseng
dc.titleGARCH-type volatility in the multiplicative quadrinomial tree method: An application to real optionseng
dc.typearticleeng
dc.typeinfo:eu-repo/semantics/articleeng
dc.typeinfo:eu-repo/semantics/publishedVersioneng
dc.typepublishedVersioneng
dc.type.localArtículospa

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