Use this URL to cite or link to this record in EThOS: http://ethos.bl.uk/OrderDetails.do?uin=uk.bl.ethos.513480
Title: Markov chains and the pricing of derivatives
Author: Lo, Harry Chung Heng
Awarding Body: Imperial College London
Current Institution: Imperial College London
Date of Award: 2009
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Abstract:
A numerical method for pricing financial derivatives based on continuous-time Markov chains is proposed. It approximates the underlying stochastic process by a continuous-time Markov chain. We show how to construct a multi-dimensional continuous-time Markov chain such that it converges in distribution to a multi-dimensional diffusion process. The method is flexible enough to be applied to a model where the underlying process contains local volatility, stochastic volatility and jumps. Furthermore, we introduce a method to approximate the dynamics of the realized variance of a Markov chain and an algorithm to reduce the complexity of computing the joint probability distribution between the realized variance and the underlying.
Supervisor: Mijatovic, Aleksandar Sponsor: Not available
Qualification Name: Thesis (Ph.D.) Qualification Level: Doctoral
EThOS ID: uk.bl.ethos.513480  DOI: Not available
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