hh.sePublications
Change search
CiteExportLink to record
Permanent link

Direct link
Cite
Citation style
  • apa
  • harvard1
  • ieee
  • modern-language-association-8th-edition
  • vancouver
  • Other style
More styles
Language
  • de-DE
  • en-GB
  • en-US
  • fi-FI
  • nn-NO
  • nn-NB
  • sv-SE
  • Other locale
More languages
Output format
  • html
  • text
  • asciidoc
  • rtf
Arbitrage-free market models for interest rate options and future options: the multi-strike case
Halmstad University, School of Information Science, Computer and Electrical Engineering (IDE). Halmstad University, School of Information Science, Computer and Electrical Engineering (IDE), Halmstad Embedded and Intelligent Systems Research (EIS), MPE-lab. (Financial Mathematics)
Halmstad University, School of Information Science, Computer and Electrical Engineering (IDE). Halmstad University, School of Information Science, Computer and Electrical Engineering (IDE), Halmstad Embedded and Intelligent Systems Research (EIS), MPE-lab. (Financial Mathematics)
2010 (English)Independent thesis Advanced level (degree of Master (One Year)), 15 credits / 22,5 HE creditsStudent thesis
Abstract [en]

This work mainly studies modeling and existence issues for martingale models of option markets with one stock and a collection of European call options for one fixed maturity and infinetely many strikes. In particular, we study Dupire's and Schweizer-Wissel's models, especially the latter one. These two types of models have two completely different pricing approachs, one of which is martingale approach (in Dupire's model), and other one is a market approach (in Schweizer-Wissel's model). After arguing that Dupire's model suffers from the several lacks comparing to Schweizer-Wissel's model, we extend the latter one to get the variations for the case of options on interest rate indexes and futures options. Our models are based on the newly introduced definitions of local implied volatilities and a price level proposed by Schweizer and Wissel. We get explicit expressions of option prices as functions of the local implied volatilities and the price levels in our variations of models. Afterwards, the absence of the dynamic arbitrage in the market for such models can be described in terms of the drift restrictions on the models' coefficients. Finally we demonstrate the application of such models by a simple example of an investment portfolio to show how Schweizer-Wissel's model works generally.

Place, publisher, year, edition, pages
2010. , p. 78
Keywords [en]
Financial Mathem, atics, arbitrage-free market, interest rate options, multy-strike case
National Category
Computational Mathematics Probability Theory and Statistics
Identifiers
URN: urn:nbn:se:hh:diva-6220OAI: oai:DiVA.org:hh-6220DiVA, id: diva2:360044
Presentation
2010-06-03, Wigforss Hörsal, Halmstad, 301 18, Visionen, Halmstad University, 13:00 (English)
Uppsok
Physics, Chemistry, Mathematics
Supervisors
Examiners
Available from: 2010-11-01 Created: 2010-11-01 Last updated: 2010-11-01Bibliographically approved

Open Access in DiVA

fulltext(686 kB)333 downloads
File information
File name FULLTEXT01.pdfFile size 686 kBChecksum SHA-512
1f8f14fb97714aad00f27a2760d4ffc5c1b3de873bb1d2e6078973234850c418f51cd7d655db160a9c24e58ffdd6b9aa3155908e5b3ba5ed519035b01519524d
Type fulltextMimetype application/pdf

Search in DiVA

By author/editor
Ye, Hui
By organisation
School of Information Science, Computer and Electrical Engineering (IDE)MPE-lab
Computational MathematicsProbability Theory and Statistics

Search outside of DiVA

GoogleGoogle Scholar
Total: 333 downloads
The number of downloads is the sum of all downloads of full texts. It may include eg previous versions that are now no longer available

urn-nbn

Altmetric score

urn-nbn
Total: 219 hits
CiteExportLink to record
Permanent link

Direct link
Cite
Citation style
  • apa
  • harvard1
  • ieee
  • modern-language-association-8th-edition
  • vancouver
  • Other style
More styles
Language
  • de-DE
  • en-GB
  • en-US
  • fi-FI
  • nn-NO
  • nn-NB
  • sv-SE
  • Other locale
More languages
Output format
  • html
  • text
  • asciidoc
  • rtf