Title page for ETD etd-050411-132541

Document Type	thesis
Author Name	Wolf, Diana Holmes
URN	etd-050411-132541
Title	Pricing American Options on Leveraged Exchange Traded Funds in the Binomial Pricing Model
Degree	MS
Department	Mathematical Sciences
Advisors	Marcel Blais, Advisor
Keywords	Binomial Pricing Model American Options Leveraged Exchange Traded Funds
Date of Presentation/Defense	2011-05-04
Availability	unrestricted
Abstract This paper describes our work pricing options in the binomial model on leveraged exchange traded funds (ETFs) with three different approaches. A leveraged exchange traded fund attempts to achieve a similar daily return as the index it follows but at a specified positive or negative multiple of the return of the index. We price options on these funds using the leveraged multiple, predetermined by the leveraged ETF, of the volatility of the index. The initial approach is a basic time step approach followed by the standard Cox, Ross, and Rubinstein method. The final approach follows a different format which we will call the Trigeorgis pricing model. We demonstrate the difficulties in pricing these options based off the dynamics of the indices the ETFs follow.
Files	dwolf.pdf

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