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

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

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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) • 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!