Stochastic Calculus for Option Pricing with Convex Duality, Logistic Model, and Numerical Examination

Zheng Cao

Papers from arXiv.org

Abstract: This thesis explores the historical progression and theoretical constructs of financial mathematics, with an in-depth exploration of Stochastic Calculus as showcased in the Binomial Asset Pricing Model and the Continuous-Time Models. A comprehensive survey of stochastic calculus principles applied to option pricing is offered, highlighting insights from Peter Carr and Lorenzo Torricelli's ``Convex Duality in Continuous Option Pricing Models". This manuscript adopts techniques such as Monte-Carlo Simulation and machine learning algorithms to examine the propositions of Carr and Torricelli, drawing comparisons between the Logistic and Bachelier models. Additionally, it suggests directions for potential future research on option pricing methods.

Date: 2024-08
New Economics Papers: this item is included in nep-big
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