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Project3 - Slide 1 2003 By Default Pricing American Call...

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© 2003 By Default! A Free sample background from www.awesomebackgrounds.com Slide 1 Pricing American Call Options Group Members: Rachit Agarwal Shuaul Arefeen Natansh Dave Syed Taha Naqvi Vikas Padiyar Sher Afzal Paracha
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© 2003 By Default! A Free sample background from www.awesomebackgrounds.com Slide 2 Problem Pricing an American call option using Monte- Carlo Simulation Target Population: American call options traded on all publicly traded stocks
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© 2003 By Default! A Free sample background from www.awesomebackgrounds.com Slide 3 Plan Study Population: All American call options traded on all North American exchanges - Study Error Sample Population: American call options traded on 12 stocks - Sample Error
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© 2003 By Default! A Free sample background from www.awesomebackgrounds.com Slide 4 Plan Model: Black Scholes - Log-Normal distribution for the rate of return on the stocks - St/St-1 ~ logNormal( r - σ2/2, σ2 ) , where r = Expected rate of return (CAPM) σ2 = Historical volatility - dSt = rStdt + σStdWt
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© 2003 By Default!
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