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Change of Time Method: Applications to Mathematical Finance. II. Anatoliy Swishchuk Math & Comp Finance Lab Dept of Math & Stat, U of C “Lunch at the Lab” Talk November 8, 2005. Outline. Change of Time Method (CTM) (minutes of the previous talk) Mean-Reverting Model (MRM)

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change of time method applications to mathematical finance ii

Change of Time Method: Applications to Mathematical Finance. II.

Anatoliy Swishchuk

Math & Comp Finance Lab

Dept of Math & Stat, U of C

“Lunch at the Lab” Talk

November 8, 2005

outline
Outline
  • Change of Time Method (CTM) (minutes of the previous talk)
  • Mean-Reverting Model (MRM)
  • Solution of MRM by CTM
  • Option Pricing Formula
  • Black - Scholes Formula Follows: L=0, a^*=-r
  • Numerical Example (AECO Natural Gas Index)
expression for c t
Expression for C_T

C_T=BS(T)+A(T)

expression for a t ii
Expression for A(T).II.

Characteristic function of Eta(T):

paper may be found on the following web page e yellow series listing
Paper may be found on the following web page(E-Yellow Series Listing):

http://www.math.ucalgary.ca/research/preprint.php

the end
The End

Thank You for Your Attention and Time!