... outcome is generated with a Monte Carlo simulation. A taller peak and fatter tails (kurtosis), which the probability distribution of monthly S&P 500 index returns contains, is produced by integrating a CND model and a bootstrapping model. The serial correlation of volatilities is simulated by applying...

... volatility by viewing the call price as an expected value of a truncated lognormal distribution. Design/methodology/approach Using Taylor series expansion the call price under random volatility is expressed as a function of kurtosis of the observed volatility process and applied to various class of GARCH...

... as a moment of a truncated normal distribution. Findings Kurtosis for RCA and for GARCH process is derived. Application of random coefficient GARCH kurtosis in analytical approximation of option pricing is discussed. Originality/value Findings are useful in financial modeling. We shall make...