For more information about this meeting, contact Victor Nistor, Anna Mazzucato, Manfred Denker.
| Title: | Option pricing by approximation: short time asymptotics |
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| Seminar: | Financial Mathematics Seminar |
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| Speaker: | Wen Cheng, Penn State |
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| Abstract: |
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| Many assumptions behind the Black-Scholes-Merton model are violated in practice. This motivates
researchers and practitioners to study more complicated models, such as local volatility models and
stochastic volatility models. However, these models are also more challenging in the sense that they
do not admit closed form formulas for European option prices. Therefore, one has to turn to numerical
or other analytical methods. In this talk we shall discuss the short-time asymptotics approach. By a
no arbitrage argument or Feymann-Kac formula, it is known that European option prices are solutions
of second order parabolic equations. As a result, we can find asymptotic expansions of option prices by approximating the Green functions of parabolic operators. In particular, the newly developed
Dyson-Taylor Commutator method will be discussed. |
Room Reservation Information
| Room Number: | MB106 |
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| Date: | 08 / 23 / 2011 |
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| Time: | 01:20pm - 02:20pm |
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