Numerical Techniques for Determining Unknown Parameters in Option Pricing
The Black-Scholes model assume that volatility and interest rates are constant. However, in reality, volatility cannot be stable nor can interest rates be constant. This thesis developed a model to recover unknown non-constant volatilities from one option contract period using simulated data, by tak...
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| Format: | Thesis |
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Curtin University
2022
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| Online Access: | http://hdl.handle.net/20.500.11937/92350 |
| Summary: | The Black-Scholes model assume that volatility and interest rates are constant. However, in reality, volatility cannot be stable nor can interest rates be constant. This thesis developed a model to recover unknown non-constant volatilities from one option contract period using simulated data, by taking the derivative with respect to volatility in the theoretical model to obtain non-constant volatilities. Non-constant volatility recovered from the market using this model matched with non-constant market volatility from simulated data. |
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