Artificial neural network model of the hybrid EGARCH volatility of the Taiwan stock index option prices

Physica A: Statistical Mechanics and its Applications

Volumn 387, Issue 13, 2008, Pages 3192-3200

  Tseng, Chih Hsiung ^a   Cheng, Sheng Tzong ^a   Wang, Yi Hsien ^b   Peng, Jin Tang ^b  

^a NATIONAL CHENG KUNG UNIVERSITY   (Taiwan)

^b YUANPEI UNIVERSITY   (Taiwan)

Author keywords

Artificial neural networks; EGARCH; Grey forecasting model

Indexed keywords

COSTS; ERROR ANALYSIS; INVENTORY CONTROL; MATHEMATICAL MODELS;

GREY FORECASTING MODELS; HYBRID EGARCH VOLATILITY;

NEURAL NETWORKS;

EID: 40849106377     PISSN: 03784371     EISSN: None     Source Type: Journal    
DOI: 10.1016/j.physa.2008.01.074     Document Type: Article

References (54)

1. Ahn B.S., Cho S.S., and Kim C.Y. The integrated methodology of rough set theory and artificial neural network for business failure prediction. Expert Systems With Applications 18 (2000) 65-74
2. Altman E., Marco G., and Varetto F. Corporate distress diagnosis: Comparisons using linear discriminant analysis and neural networks. Journal of Banking & Finance 18 (1994) 505-529
3. Amilon H. A neural network versus Black-Scholes: A comparison of pricing and hedging performances. Journal of Forecasting 22 (2003) 317-335
4. Ang A., and Chen J. Asymmetric correlations of equity Portfolios. Journal of Financial Economics 63 (2002) 443-494
5. Binner J.M., Bissoondeeal R.K., Elger T., Gazely A.M., and Mullineux A.W. A comparison of linear forecasting models and neural networks: An application to Euro inflation and Euro divisia. Applied Economics 37 (2005) 665-680
6. Black F., and Scholes M. The pricing of options and corporate liabilities. Journal of Political Economy 81 (1973) 637-659
7. Black A.J., and McMillan D.G. Nonlinear predictability of value and growth stocks and economic activity. Journal of Business Finance & Accounting 31 (2004) 439-474
8. Bollerslev T. Generalized autoregressive conditional heteroskedasticity. Journal of Econometrics 31 (1986) 307-327
9. Bollerslev T., Chou R.Y., and Kroner K.F. ARCH modeling in finance: A review of the theory and empirical evidence. Journal of Econometrics 52 (1992) 5-59
10. Chen L.H., and Cheng Y.J. Assessing the performance of various evaluation periods between the market model and the grey model in relation to event study. Journal of Information and Optimization Sciences 27 (2006) 649-663
11. Deng J.L. Control problem of grey system. Systems and Control Letters 1 (1982) 288-294
12. Donaldson R.G., and Kamstra M. Using dividend forecasting models to reject bubbles in asset prices: The case of the crash of 1929. Review of Financial Studies 9 (1996) 333-383
13. Duan J.C. The GARCH option pricing model. Mathematical Finance 5 (1995) 13-32
14. Duan J.C., and Zhang H. Pricing Hang Seng index options around the Asian financial crisis-A GARCH approach. Journal of Banking & Finance 25 (2001) 1989-2014
15. Dunis C.L., and Huang X. Forecasting and trading currency volatility: An application of recurrent neural regression and model combination. Journal of Forecasting 13 (2002) 317-354
16. Dutta S., and Kamstra M. Bond-rating: A non-conservative application of neural networks. IEEE International Conference on Neural Networks (1988) 443-450
17. Engle R.F. Autoregressive conditional heteroskedasticity with estimates of the variance of United Kingdom inflation. Econometrica 50 (1982) 987-1007
18. Engle R.F., and Ng V. Measuring and testing the impact of news on volatility. Journal of Finance 45 (1993) 1749-1777
19. Hamid S.A., and Iqbal Z. Using neural networks for forecasting volatility of S&P 500 Index futures prices. Journal of Business Research 57 (2004) 1116-1125
20. Harvey C.R., and Siddique A. Autoregressive conditional skewness. Journal of Financial and Quantitative Analysis 34 (1999) 465-487
21. Harvey C.R., and Siddique A. Conditional skewness in asset pricing tests. Journal of Finance 34 (2000) 465-487
22. Heston S.L. A closed-form solution for options with stochastic volatility with applications to bond and currency options. Review of Financial Studies 6 (1993) 327-343
23. Heston S.L., and Nandi S. A closed-form GARCH option valuation model. Review of Financial Studies 13 (2000) 585-625
24. Hull J., and White A. The pricing of options on assets with stochastic volatilities. Journal of Finance 42 (1987) 281-300
25. Hutchinson J.M., Lo A.W., and Poggio T. A nonparametric approach to pricing and hedging derivative securities via learning networks. Journal of Finance 49 (1994) 851-859
26. Jasic T., and Wood D. The profitability of daily stock market indices trades based on neural network predictions: Case study for the S&P 500, the DAX, the TOPIX and the FTSE in the period 1965-1999. Applied Financial Economics 14 (2004) 285-297
27. Kanas A. Neural network linear forecasts for stock returns. International Journal of Finance & Economics 13 (2001) 317-354
28. Kanas A., and Yannopoulos1 A. Comparing linear and nonlinear forecasts for stock returns. International Review of Economics & Finance 10 (2001) 383-398
29. Lin C.T., and Yeh H.Y. The valuation of Taiwan stock index option prices - comparison of performances between Black-Scholes and neural network model. Journal of Statistics & Management Systems 8 (2005) 355-367
30. Lin C.T., and Chen L.H. A grey analysis of bank re-decreasing the required reserve ratio. The Journal of Grey System 11 (1999) 119-132
31. Lin C.T., and Yang S.Y. Using grey relation to assess home mortgage applications. International Journal of Management 19 (2002) 300-307
32. Mahlhotra R., and Malhotra D.K. Evaluating consumer loans using neural networks. OMEGA 31 (2003) 83-96
33. Makridakis S. Accuracy measures: Theoretical and practical concerns. International Journal of Forecasting 9 (1993) 527-529
34. Maasoumi E., and Racine J. Entropy and predictability of stock market returns. Journal of Econometrics 107 (2002) 291-312
35. McMillan D.G., and Speight A.E.H. Daily volatility forecast: Reassessing the performance of GARCH models. Journal of Forecasting 23 (2004) 449-460
36. Medeiros M.C., Teräsvirta T., and Rech G. Building neural network models for time series: A statistical approach. Journal of Econometrics 25 (2005) 49-75
37. Nelson D. Conditional heteroskedasticity in asset returns: A new approach. Econometria 59 (1991) 347-370
38. Plasmans J., Verkooijen W., and Daniels H. Estimating structural exchange rate models by artificial neural networks. Applied Financial Economics 8 (1998) 541-551
39. Qi M. Nonlinear predictability of stock returns using financial and economic variables. Journal of Business & Economic Statistics 17 (1999) 419-429
40. Qi M., and Wu Y. Nonlinear prediction of exchange rates with monetary fundamentals. Journal of Empirical Finance 10 (2003) 623-640
41. Pagan A.R., and Schwert G.W. Alternative models for conditional stock volatility. Journal of Econometrics 45 (1990) 267-290
42. Rapach D.E., and Wohar M.E. Valuation ratios and long-horizon stock price predictability. Journal of Applied Econometrics 20 (2005) 327-344
43. Sabbatini M., and Linton O. A GARCH model of the implied volatility of the Swiss market index from option prices. International Journal of Forecasting 14 (1998) 199-213
44. Saltoglu B. Comparing forecasting ability of parametric and non-parametric methods: An application with Canadian monthly interest rates. Applied Financial Economics 13 (2003) 169-176
45. Scott L. Option pricing when the variance changes randomly: Theory, estimators and applications. Journal of Financial & Quantitative Analysis 22 (1987) 419-438
46. Shachmurove Y. Business applications of emulative neural networks. International Journal of Business 10 (2005) 303-322
47. Shively P.A. The nonlinear dynamics of stock prices. Quarterly Review of Economics and Finance 13 (2003) 505-517
48. Shih D.H., and Shyu G.S. A study and prediction of life insurance demand in Taiwan. Journal of Management and System 6 (1999) 29-46
49. Tam K.Y., and Kiang M.Y. Managerial applications of neural networks: The case of bank failure predictions. Management Science 38 (1992) 926-947
50. Tseng F.M., Yu H.C., and Tzeng G.H. Applied hybrid grey model to forecast seasonal time series. Technological Forecasting and Social Change 67 (2001) 291-302
51. Tu Y.C., Lin C.T., and Tsai H.J. The performance evaluation of stock-listed banks in Taiwan via grey relational analysis. The Journal of Grey System 13 (2001) 153-164
52. Wang Y.F. Predicting stock price using fuzzy grey prediction system. Expert Systems with Applications 22 (2002) 33-38
53. Yao J., Li Y., and Tan C.L. Option price forecasting using neural networks. Omega 28 (2000) 455-466
54. Zhang G.P., and Berardi V.L. Time series forecasting with neural network ensembles: An application for exchange rate prediction. Journal of the Operational Research Society 52 (2001) 652-664