Faculty Advisor or Committee Member

Marcel Y. Blais, Advisor

Identifier

etd-050311-184136

Abstract

This report describes our work in pricing options using computational methods. First, I collected the historical asset prices for assets in four economic sectors to estimate model parameters, such as asset returns and covariances. Then I used these parameters to model asset prices using multiple geometric Brownian motion and simulate new asset prices. Using the generated prices, I used Monte Carlo methods and control variates to price call options. Next I used the binomial tree model to price put options, which I was introduced to in the course Math 571: Financial Mathematics I. Using the estimated put and call option prices together with some stocks, I formed a portfolio in an Interactive Brokers paper account . 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

2011-05-03

Accessibility

Unrestricted

Subjects

The Monte Carlo Methods

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