Pricing European option price in jump-diffusion model / Anisah Abdul Rahman, Siti Salihah Shaffie and Nadzri Mohamad
This research presents a numerical method for pricing European options. The method is based on the jump diffusion process. The Merton’s jump-diffusion model has become a popular model among researchers. The problem of pricing options with Black-Scholes framework remains a contemporary research topi...
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| Format: | Conference or Workshop Item |
| Language: | en |
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2012
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| Online Access: | https://ir.uitm.edu.my/id/eprint/43199/1/43199.pdf https://ir.uitm.edu.my/id/eprint/43199/ |
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| _version_ | 1833067199828328448 |
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| author | Abdul Rahman, Anisah Shaffie, Siti Salihah Mohamad, Nadzri |
| author_facet | Abdul Rahman, Anisah Shaffie, Siti Salihah Mohamad, Nadzri |
| author_sort | Abdul Rahman, Anisah |
| building | Tun Abdul Razak Library |
| collection | Institutional Repository |
| content_provider | Universiti Teknologi Mara |
| content_source | UiTM Institutional Repository |
| continent | Asia |
| country | Malaysia |
| description | This research presents a numerical method for pricing European options. The method is based on the jump diffusion process. The Merton’s jump-diffusion model has become a popular model among researchers. The
problem of pricing options with Black-Scholes framework remains a contemporary research topic. The Merton
model extends the Black-Scholes model making iteasy to produce an analytical solution for a variety of option
pricing problems. According to Peter Car, jump-diffusion has become a popular model being used by the
researchers because it is better able to fit smile volatility. There exists a consistent theoretical framework enabling experimentations with adapting the stock hedge or hedging with option.In essence, the Merton model
can be applied directly, given a slight reinterpretation of the parameters of the model. The reinterpretation
requires that we substitute the stock index value, for the stock price in the Merton’s model. We also substitute
the dividend rate on stock index, which we presume to equal risk-free rate. With these substitutions, we can
apply the Merton’s model to price the options. |
| format | Conference or Workshop Item |
| id | my.uitm.ir-43199 |
| institution | Universiti Teknologi Mara |
| language | en |
| publishDate | 2012 |
| record_format | eprints |
| spelling | my.uitm.ir-431992021-03-10T06:56:27Z https://ir.uitm.edu.my/id/eprint/43199/ Pricing European option price in jump-diffusion model / Anisah Abdul Rahman, Siti Salihah Shaffie and Nadzri Mohamad Abdul Rahman, Anisah Shaffie, Siti Salihah Mohamad, Nadzri General works. Financial institutions Capital costs Malaysia Investment, capital formation, speculation Financial leverage Malaysia This research presents a numerical method for pricing European options. The method is based on the jump diffusion process. The Merton’s jump-diffusion model has become a popular model among researchers. The problem of pricing options with Black-Scholes framework remains a contemporary research topic. The Merton model extends the Black-Scholes model making iteasy to produce an analytical solution for a variety of option pricing problems. According to Peter Car, jump-diffusion has become a popular model being used by the researchers because it is better able to fit smile volatility. There exists a consistent theoretical framework enabling experimentations with adapting the stock hedge or hedging with option.In essence, the Merton model can be applied directly, given a slight reinterpretation of the parameters of the model. The reinterpretation requires that we substitute the stock index value, for the stock price in the Merton’s model. We also substitute the dividend rate on stock index, which we presume to equal risk-free rate. With these substitutions, we can apply the Merton’s model to price the options. 2012 Conference or Workshop Item PeerReviewed text en https://ir.uitm.edu.my/id/eprint/43199/1/43199.pdf Pricing European option price in jump-diffusion model / Anisah Abdul Rahman, Siti Salihah Shaffie and Nadzri Mohamad. (2012) In: 1st International Conference on Innovation and Technology for Sustainable Built Environment 2012 (ICITSBE 2012), 16-17 April 2012, Universiti Teknologi MARA Cawangan Perak. |
| spellingShingle | General works. Financial institutions Capital costs Malaysia Investment, capital formation, speculation Financial leverage Malaysia Abdul Rahman, Anisah Shaffie, Siti Salihah Mohamad, Nadzri Pricing European option price in jump-diffusion model / Anisah Abdul Rahman, Siti Salihah Shaffie and Nadzri Mohamad |
| title | Pricing European option price in jump-diffusion model / Anisah Abdul Rahman, Siti Salihah Shaffie and Nadzri Mohamad |
| title_full | Pricing European option price in jump-diffusion model / Anisah Abdul Rahman, Siti Salihah Shaffie and Nadzri Mohamad |
| title_fullStr | Pricing European option price in jump-diffusion model / Anisah Abdul Rahman, Siti Salihah Shaffie and Nadzri Mohamad |
| title_full_unstemmed | Pricing European option price in jump-diffusion model / Anisah Abdul Rahman, Siti Salihah Shaffie and Nadzri Mohamad |
| title_short | Pricing European option price in jump-diffusion model / Anisah Abdul Rahman, Siti Salihah Shaffie and Nadzri Mohamad |
| title_sort | pricing european option price in jump-diffusion model / anisah abdul rahman, siti salihah shaffie and nadzri mohamad |
| topic | General works. Financial institutions Capital costs Malaysia Investment, capital formation, speculation Financial leverage Malaysia |
| url | https://ir.uitm.edu.my/id/eprint/43199/1/43199.pdf https://ir.uitm.edu.my/id/eprint/43199/ |
| url_provider | http://ir.uitm.edu.my/ |