Dear R-Users,
I'm trying to estimate GARCH parameters implied by options prices (on
wednesdays only) by minimizing the average mean squared dollar error between
the market and the model price, but I always get the following error message:
Error in chol.default(Hessian) :
the leading minor of order 1 is not positive definite
# model mean under the risk neutral measure: R[t] = r-0.5*hh[t]+sqrt(hh[t])*z[t]
# cond. variance under the risk neutral measure: hh[t] = alpha0 + beta*hh[t-1]
+ alpha*hh[t-1]*z[t-1]
# z~N(0,1), lambda = 0
Any help will be greatly appreciated.
Desislava Kavrakova
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