Identifier

etd-11082016-015550

Degree

Master of Science (MS)

Department

Mathematics

Document Type

Thesis

Abstract

This paper develops several methods to estimate a future volatility of a stock in order to correctly price corresponding stock options. The pricing model known as Black-Scholes-Merton is presented with a constant volatility parameter and compares it to stochastic volatility models. It mathematically describes the probability distribution of the underlying stock price changes implied by the models and the consequences. Arbitrage opportunities between stock options of various maturities or strike prices are explained from the volatility smile and volatility term structure.

Date

2016

Document Availability at the Time of Submission

Release the entire work immediately for access worldwide.

Committee Chair

Sengupta, Ambar

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