Worcester Polytechnic Institute Electronic Theses and Dissertations Collection

Title page for ETD etd-050311-184136


Document Typemasters report
Author NameSun, Xihao
URNetd-050311-184136
TitlePricing Options with Monte Carlo and Binomial Tree Methods
DegreeMS
DepartmentMathematical Sciences
Advisors
  • Marcel Y. Blais, Advisor
  • Keywords
  • The Monte Carlo Methods
  • Date of Presentation/Defense2011-05-04
    Availability unrestricted

    Abstract

    This report describes our work in pricing options using computational methods. First, I collected the historical asset prices for assets in four economic sectors to estimate model parameters, such as asset returns and covariances. Then I used these parameters to model asset prices using multiple geometric Brownian motion and simulate new asset prices. Using the generated prices, I used Monte Carlo methods and control variates to price call options. Next I used the binomial tree model to price put options, which I was introduced to in the course Math 571: Financial Mathematics I. Using the estimated put and call option prices together with some stocks, I formed a portfolio in an Interactive Brokers paper account . This project was done a part of the masters capstone course Math 573: Computational Methods of Financial Mathematics.

    Files
  • XIHAO_SUN_REPORT.pdf

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