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

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

Identiferoai:union.ndltd.org:UPSALLA1/oai:DiVA.org:hh-2199
Date January 2008
CreatorsSdobnova, Alena, Blaszkiewicz, Jakub
PublisherHögskolan i Halmstad, Sektionen för Informationsvetenskap, Data– och Elektroteknik (IDE), Högskolan i Halmstad, Sektionen för Informationsvetenskap, Data– och Elektroteknik (IDE), Högskolan i Halmstad/Sektionen för Informationsvetenskap, Data- och Elektroteknik (IDE)
Source SetsDiVA Archive at Upsalla University
LanguageEnglish
Detected LanguageEnglish
TypeStudent thesis, info:eu-repo/semantics/bachelorThesis, text
Formatapplication/pdf
Rightsinfo:eu-repo/semantics/openAccess

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