Open Access. Powered by Scholars. Published by Universities.®
Finance and Financial Management Commons™
Open Access. Powered by Scholars. Published by Universities.®
- Discipline
Articles 1 - 2 of 2
Full-Text Articles in Finance and Financial Management
Implementing The Heston Option Pricing Model In Object-Oriented Cython, Brandon Hardin
Implementing The Heston Option Pricing Model In Object-Oriented Cython, Brandon Hardin
All Graduate Plan B and other Reports, Spring 1920 to Spring 2023
The 1973 Black-Scholes model, a revolutionary option pricing formula whose price is 'relatively close to observed prices, makes an assumption that the volatility is constant and thus, deterministic. This causes some inefficiencies and patterns in the pricing of options due to the model providing evidence of the volatility smile' of the volatility. Many scholars have suggested that the volatility should be modelled by a stochastic process and the (1993) Heston Model is one of many proposed solutions to remedy this problem. The Heston Model allows for the 'smile' by defining the volatility as a stochastic process. This thesis considers a …
The Effect Of Kurtosis On The Cross-Section Of Stock Returns, Abdullah Al Masud
The Effect Of Kurtosis On The Cross-Section Of Stock Returns, Abdullah Al Masud
All Graduate Plan B and other Reports, Spring 1920 to Spring 2023
In this study, I show an effect of the statistical fourth moment on stock returns. In the mean-variance framework, rational investors follow two strategies: optimize the mean{variance of return and diversify the portfolio. Regarding the first approach, investors intend to generate the maximum level of return while facing a constant level of risk (or, the standard deviation) of return. It is possible that firm specific risk can be concentrated in the portfolio. However, diversification of the assets can eliminate that (idiosyncratic) risk from the portfolio. After a long period of time, in a diversified portfolio the shape of the return …