PSU Mark
Eberly College of Science Mathematics Department

Meeting Details

For more information about this meeting, contact Victor Nistor, Anna Mazzucato, Manfred Denker.

Title:Option pricing by approximation: short time asymptotics
Seminar:Probability and Financial Mathematics Seminar
Speaker:Wen Cheng, Penn State
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
Date:08 / 23 / 2011
Time:01:20pm - 02:20pm