A Persistent Random Walk and Options Pricing

When
Start: 03/24/2011 - 4:15pm
End  : 03/24/2011 - 5:15pm

Category
Statistics/OR/Math Finance Seminar

Speaker
Harish Bhat, UC Merced

Abstract

We define a persistent random walk as a modification of the simple random walk in which the direction and magnitude of the walker's step depends on the previous step. We first discuss the exact distribution, asymptotic behavior, and continuum approximation of this process. We then describe an arbitrage-free options pricing theory in which the underlying asset follows a persistent random walk. Comparisons between model and market prices will be made.

Where
Harvey Mudd College, 3rd floor Sprague. Refreshments at 4pm.