*Tid:* **28 april 2008 kl 15.15-16.00 **
*Plats :* **Seminarierummet 3733**, Institutionen för
matematik, KTH, Lindstedts väg 25, plan 7. Karta!
*Föredragshållare:*
**
Erik Svensson
**
**Titel:**
Modeling of Volatility Adjusted Leverage Options
**Sammanfattning:**
In this thesis we consider Volatility Adjusted Leverage (VAL)
options, a novel type of path dependent equity index derivative that
has variable exposure to the underlying asset. The exposure is
related to the realized volatiliy of the underlying in order to
maintain a constant pre-defined target volatility. We price the
derivative using Monte Carlo simulation in the standard Black-Scholes
framework, Heston's stochastic volatility model and the Bates model,
which combines stochastic volatility with jumps. The models were
calibrated to an implied volatility surface of EuroStoxx 50. Our
findings suggest that jumps affect the price of VAL options more
than stochastic volatility. We also propose a simple and
computationally efficient method to compute approximate prices.
Furthermore, we illustrate how to approximately compute the delta of
a VAL option and that the vega-risk is very small compared to vanilla
options.
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