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Option Pricing under Risk Neutral prob.

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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  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!

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