Journal
JOURNAL OF FUTURES MARKETS
Volume 40, Issue 12, Pages 1880-1917Publisher
WILEY
DOI: 10.1002/fut.22157
Keywords
Heston-Nandi GARCH model; inverse gaussian model; joint calibration; target volatility options; VIX options
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In this paper we propose semiclosed-form solutions, subject to an inversion of the Fourier transform, for the price of VIX options and target volatility options under affine GARCH models based on Gaussian and Inverse Gaussian distributions. We illustrate the advantage of the proposed analytic expressions by comparing them with those obtained from benchmark Monte-Carlo simulations. The empirical performance of the two affine GARCH models is tested using different calibration exercises based on historical returns and market quotes on VIX and SPX options.
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