Applied Study Of Option Pricing For Stochastic Volatility Model Based On Generalized Moment Method

The risks of the financial asset prices arise from the fluctuation,which is defined by volatility.At present,there are two main types of method to research volalitliy as follows: one mentions on the real volatility estimated by integral method,and the other is the dynamic process of volatility.This paper will focus on the latter and develop the Generalized Moment Method(MM)to make parametric estimations and statistical Inference by using Shanghai Index.Under the framework of the infinitesimal generator,the conditional expectation operator,the Taylor expansion of the differential operator,etc.,this research also determines the necessary conditions for the generalized method of moment(GMM),namely,the orthogonal moment condition.Meanwhile,We will propose filtered values of the stochastic volatility by developing the sampling-importance resampling algorithm.Moveover,this paper presents the partial differential equation and Monte Carlo method to compute the European Call Option for stochastic volatility model.The empirical results show that the model established need to introduce stochastic volatility,but that the model can describe some major economic phenomena.Finally,we will carry out the numerical results for European Call Option by using Monte Carlo Method.