통계연구소에서는 다음과 같이 통계 세미나를 개최하오니 많은 참여 바랍니다.

 

일시: 2011년 5월 11일(수) 오후 5시

장소: 고려대학교 정경관 508호

연사: Jungyeon Yoon

(Assistant Professor at Korea Banking Institute)

 

 

"Generalized Black-Scholes option pricing with

an approximation scheme for stochastic volatility models"

 

 

 

 

<Abstract>

 

Despite the success and the user-friendly features of Black-Scholes (BS) pricing, many empirical results in the option pricing literature have shown the departures from the Black-Scholes model. Stochastic volatility models have gradually emerged as a useful way of modeling time-varying volatility with significant potential applications, especially in finance. Stochastic volatility models alone have not been proved entirely empirically successful. We use the stochastic volatility model that allows random jumps to occur in stock prices. In order to keep analytic tractability that is challenged by many alternative models to Black-Scholes model, we derive the Generalized Black-Scholes (GBS) formula by a proper conditioning in a general mixture framework. By taking advantage of this new version of option pricing formula, we propose an approximation scheme that is well suited for the conditional Monte Carlo method. The simulation study and Markov Chain Monte Carlo (MCMC) algorithm give an evidence of a huge computational time reduction in the proposed method without much loss of accuracy.