The Black-Scholes formula is a well-known model for pricing and hedging derivative securities. It relies on a several assumptions. This paper examines the Black-Scholes Formula where the security follows a geometric Brownian motion, with a fixed volatility, under the relevant assumption of no- arbitrage conditions. Hedging strategies with some Greeks parameters were established. The Black-Scholes formula with a stochastic volatility which follows the OU process is introduced. Then the European Call option is simulated by Monte Carlo method.
Black-Scholes Model and Monte Carlo Simulation
KANE, RACINE
2021/2022
Abstract
The Black-Scholes formula is a well-known model for pricing and hedging derivative securities. It relies on a several assumptions. This paper examines the Black-Scholes Formula where the security follows a geometric Brownian motion, with a fixed volatility, under the relevant assumption of no- arbitrage conditions. Hedging strategies with some Greeks parameters were established. The Black-Scholes formula with a stochastic volatility which follows the OU process is introduced. Then the European Call option is simulated by Monte Carlo method.È consentito all'utente scaricare e condividere i documenti disponibili a testo pieno in UNITESI UNIPV nel rispetto della licenza Creative Commons del tipo CC BY NC ND.
Per maggiori informazioni e per verifiche sull'eventuale disponibilità del file scrivere a: unitesi@unipv.it.
https://hdl.handle.net/20.500.14239/15362