Model
Digital Document
Publisher
Florida Atlantic University
Description
The main objective of this thesis is to simulate, evaluate and discuss several
methods for pricing European-style options. The Black-Scholes model has long been
considered the standard method for pricing options. One of the downfalls of the
Black-Scholes model is that it is strictly continuous and does not incorporate discrete
jumps. This thesis will consider two alternate Levy models that include discretized
jumps; The Merton Jump Diffusion and Kou's Double Exponential Jump Diffusion.
We will use each of the three models to price real world stock data through software
simulations and explore the results.Keywords: Levy Processes, Brownian motion, Option pricing, Simulation, Black-Scholes, Merton Jump Diffusion, Kou, Kou's Double Exponential Jump Diffusion.
methods for pricing European-style options. The Black-Scholes model has long been
considered the standard method for pricing options. One of the downfalls of the
Black-Scholes model is that it is strictly continuous and does not incorporate discrete
jumps. This thesis will consider two alternate Levy models that include discretized
jumps; The Merton Jump Diffusion and Kou's Double Exponential Jump Diffusion.
We will use each of the three models to price real world stock data through software
simulations and explore the results.Keywords: Levy Processes, Brownian motion, Option pricing, Simulation, Black-Scholes, Merton Jump Diffusion, Kou, Kou's Double Exponential Jump Diffusion.
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