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) • 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 C_T=BS(T)+A(T)
Expression for A(T).II. Characteristic function of Eta(T):
Paper may be found on the following web page(E-Yellow Series Listing): http://www.math.ucalgary.ca/research/preprint.php
The End Thank You for Your Attention and Time!