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Authors: S Sapna and Biju Mohan

Affiliation: Department of Information Technology, National Institute of Technology Karnataka, Surathkal, Karnataka, India

Keyword(s): Black-76 Model, GARCH, Option Pricing, Commodity Futures, Monte Carlo Simulation, Volatility.

Abstract: This research investigates the pricing of options related to silver commodity futures within the Indian market, employing a standard univariate Generalized Autoregressive Conditional Heteroscedastic (GARCH) model with a symmetric normal distribution for return modelling. The study evaluates the performance of this option pricing model specifically for silver mini futures options traded on the Multi Commodity Exchange. Furthermore, it compares the option prices determined using the GARCH model parameters with those calculated using the Black-76 model. The findings demonstrate that the option prices derived from the GARCH model fall consistently within the bid-ask price range and significantly outperform the Black-76 model in terms of option pricing accuracy. This underscores the practical utility of GARCH models in the context of the Indian commodity market. To the best of our knowledge, this research marks the pioneering attempt to incorporate parameters generated by the GARCH model for futures option pricing within the Indian commodity market. (More)

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Paper citation in several formats:
Sapna, S. and Mohan, B. (2024). Univariate GARCH Model for Futures Option Pricing: Application to Silver Mini Futures in Indian Commodity Market. In Proceedings of the 9th International Conference on Complexity, Future Information Systems and Risk - COMPLEXIS; ISBN 978-989-758-698-9; ISSN 2184-5034, SciTePress, pages 43-53. DOI: 10.5220/0012587900003708

@conference{complexis24,
author={S Sapna and Biju Mohan},
title={Univariate GARCH Model for Futures Option Pricing: Application to Silver Mini Futures in Indian Commodity Market},
booktitle={Proceedings of the 9th International Conference on Complexity, Future Information Systems and Risk - COMPLEXIS},
year={2024},
pages={43-53},
publisher={SciTePress},
organization={INSTICC},
doi={10.5220/0012587900003708},
isbn={978-989-758-698-9},
issn={2184-5034},
}

TY - CONF

JO - Proceedings of the 9th International Conference on Complexity, Future Information Systems and Risk - COMPLEXIS
TI - Univariate GARCH Model for Futures Option Pricing: Application to Silver Mini Futures in Indian Commodity Market
SN - 978-989-758-698-9
IS - 2184-5034
AU - Sapna, S.
AU - Mohan, B.
PY - 2024
SP - 43
EP - 53
DO - 10.5220/0012587900003708
PB - SciTePress

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