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Title: GARCH option pricing models with Meixner innovations Authors:  Matthias Fengler - University of Sankt Gallen (Switzerland)
Alexander Melnikov - University of Sankt Gallen (Switzerland) [presenting]
Abstract: GARCH option pricing models are presented with Meixner distributed innovations. The risk-neutral dynamics are derived by means of the conditional Esscher transform. The models are estimated from time series data and price options by simulating the transition density of stock prices and the Radon-Nikodym process under the historical measure jointly. Assessing the option pricing performance both in-sample and out-of-sample, one finds that the model compares favorably against the benchmark models. Simulations suggest that the driver of these results is the impact of conditional skewness and conditional excess kurtosis on option prices.