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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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    Presentation Transcript
    1. Option Pricingunder Risk Neutral prob. Presented by Chun-Yuan Chiu 邱俊淵

    2. Option Basic

    3. Arbitrage • 因地、因時 • Put-Call Parity:C– P + K = F

    4. The Binomial Option Pricing Model • Replicate a call: h shares of stock + B dollars

    5. The Binomial Option Pricing Model • Value of h shares of stock + B dollars at t0 :

    6. Risk Neutral Probability

    7. The Binomial Option Pricing Model • Due to the Central Limit Theorem, the risk neutral probability are normally distributed

    8. The Black-Scholes frame work

    9. Empirical Distribution

    10. GBM NIG CGMY DE JD

    11. Numerical Method

    12. Thanks for your attention!