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Analysis of An Uncertain Volatility Model in the framework of static hedging for different scenarios

<p>In Black-Scholes model, the parameters -a volatility and an interest rate were assumed as constants. In this thesis we concentrate on behaviour of the volatility as</p><p>a function and we find more realistic models for the volatility, which elimate a risk</p><p>connected with behaviour of the volatility of an underlying asset. That is</p><p>the reason why we will study the Uncertain Volatility Model. In Chapter</p><p>1 we will make some theoretical introduction to the Uncertain Volatility Model</p><p>introduced by Avellaneda, Levy and Paras and study how it behaves in the different scenarios. In</p><p>Chapter 2 we choose one of the scenarios. We also introduce the BSB equation</p><p>and try to make some modification to narrow the uncertainty bands using</p><p>the idea of a static hedging. In Chapter 3 we try to construct the proper</p><p>portfolio for the static hedging and compare the theoretical results with the real</p><p>market data from the Stockholm Stock Exchange.</p>

Identiferoai:union.ndltd.org:UPSALLA/oai:DiVA.org:hh-2199
Date January 2008
CreatorsSdobnova, Alena, Blaszkiewicz, Jakub
PublisherHalmstad University, School of Information Science, Computer and Electrical Engineering (IDE), Halmstad University, School of Information Science, Computer and Electrical Engineering (IDE), Högskolan i Halmstad/Sektionen för Informationsvetenskap, Data- och Elektroteknik (IDE)
Source SetsDiVA Archive at Upsalla University
LanguageEnglish
Detected LanguageEnglish
TypeStudent thesis, text

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