Option pricing under risk neutral prob
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Option Pricing under Risk Neutral prob. Presented by Chun-Yuan Chiu 邱俊淵. Option Basic. Arbitrage. 因地、因時 Put-Call Parity : C – P + K = F. The Binomial Option Pricing Model. Replicate a call : h shares of stock + B dollars. The Binomial Option Pricing Model.

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Option Pricing under Risk Neutral prob.

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Option pricing under risk neutral prob

Option Pricingunder Risk Neutral prob.

Presented by Chun-Yuan Chiu

邱俊淵


Option basic

Option Basic


Arbitrage

Arbitrage

  • 因地、因時

  • Put-Call Parity:C– P + K = F


The binomial option pricing model

The Binomial Option Pricing Model

  • Replicate a call: h shares of stock + B dollars


The binomial option pricing model1

The Binomial Option Pricing Model

  • Value of h shares of stock + B dollars at t0 :


Risk neutral probability

Risk Neutral Probability


The binomial option pricing model2

The Binomial Option Pricing Model

  • Due to the Central Limit Theorem, the risk neutral probability are normally distributed


The black scholes frame work

The Black-Scholes frame work


Empirical distribution

Empirical Distribution


Option pricing under risk neutral prob

GBM

NIG

CGMY

DE

JD


Numerical method

Numerical Method


Thanks for your attention

Thanks for your attention!


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