A comparison of Risk Neutral Historic Distribution-, E-GARCH-and GJR-GARCH model generated volatility skews for BRICS Securities Exchange indexes

摘要

This paper addresses a question that was raised at the ICOAE 2014, 3-5 July, Chania, Island of Crete, Greece: how do the volatility skews for the BRICS countries generated by the Risk Neutral Historic Distribution model compare to those generated by using GARCH models? More precisely, in this paper a comparison is made between the volatility skews of the BRICS countries generated by using the RNHD model and those generated by using E-GARCH and GJR-GARCH models. The effect of different interest rates on the implied volatility skews of European call options is also considered.