Finite activity jump models for option pricing

This thesis aims to look at option pricing under affine jump diffusion processes, with particular emphasis on using Fourier transforms. The focus of the thesis is on using Fourier transform to price European options and Barrier options under the Heston stochastic volatility model and the Bates model. Bates model combines Merton's jump diffusion model and Heston's stochastic volatility model. We look at the calibration problem and use Matlab functions to model the DAX options volatility surface. Finally, using the parameters generated, we use the two stated models to price barrier options.

Grantor dc:publisher.institution

Division of Actuarial Science

Year dc:date.issued

2011

Author dc:creator

• Koimburi, Mercy Muthoni

Advisor dc:contributor.advisor

• Becker, Ronald

Language dc:language.iso

eng

Handle dc:identifier.uri

http://hdl.handle.net/11427/9115

OAI identifier oai:identifier

oai:open.uct.ac.za:11427/9115