Identifier

etd-042711-230037

Abstract

This paper describes methods for pricing European and American options. Monte Carlo simulation and control variates methods are employed to price call options. The binomial model is employed to price American put options. Using daily stock data I am able to compare the model price and market price and speculate as to the cause of difference. Lastly, I build a portfolio in an Interactive Brokers paper trading [1] account using the prices I calculate. This project was done a part of the masters capstone course Math 573: Computational Methods of Financial Mathematics.

Publisher

Worcester Polytechnic Institute

Degree Name

MS

Department

Mathematical Sciences

Project Type

Thesis

Date Accepted

2011-04-27

Accessibility

Unrestricted

Subjects

control variates, binomial model, GBM, Monte Carlo simulation

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