Pricing Bivariate Option Under A GARCH-H Process With Dynamic Copula Models

In this paper, we use GARCH process and dynamic Copula to study the price of bivariate option. For the returns of financial assets whose distributions are often heavy-tailed, they are modeled by the improved GARCH process. We apply Tukey’s H-distribution family to improve GARCH process and get GARCH-H process. Through analysing the case, we could get a better result by using GARCH-H process. Since the correlation between the underlying assets is related to time, dynamic Copula is a better and popular tool to study option prices than any static model. Finally, the prices of bivariate call on max option whose financial assets are the Standard and Poor’s500and NYSE indexes are given respectively by using GARCH process and GARCH-H process with dynamic Copula.