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A COMPARISON OF THE CLASSICAL BLACK-SCHOLES MODEL AND THE GARCH OPTION PRICING MODEL FOR CURRENCY OPTIONS
(Department of Statistics and Actuarial Science; Jomo Kenyatta University of Agriculture & TechnologySchool of Mathematics, University of Nairobi, 2008)This paper looks at the consequences of introducing heteroscedasticity in option pricing. The analysis shows that introducing heteroscedasticity results in a better fitting of the empirical distribution of foreign exchange ...
