Stochastic Stock Process and Its Option Pricing for a Risk Aversion Stock Market

Author

Wang, Jun ; Wang, Juan ; Fan, Bingli

Author_Institution

Inst. of Financial Math. & Financial Eng. Coll. of Sci., Beijing Jiaotong Univ., Beijing

fYear

2008

fDate

28-29 Sept. 2008

Firstpage

1

Lastpage

5

Abstract

In this paper, we consider the contingent claim pricing and hedging of European call option. The theory of stock trading volume is applied to describe and study the fluctuations of stock prices in a stock market, and we obtain the formula for pricing a European call option. Then we discuss the range of parameters of the formula in a risk-averse market, and give the corresponding option pricing bounds. In this work, stochastic analysis and stopping theory are used to study and show the risk- neutral probability distribution for the financial model, further we study the European call option for a risk-averse stock market.

Keywords

pricing; probability; share prices; stock markets; European call option; contingent claim pricing; option pricing; risk aversion stock market; risk-neutral probability distribution; stochastic stock process; stock trading volume; Contracts; Educational institutions; Fluctuations; Information security; Investments; Mathematics; Pricing; Risk analysis; Stochastic processes; Stock markets;

fLanguage

English

Publisher

ieee

Conference_Titel

Advanced Management of Information for Globalized Enterprises, 2008. AMIGE 2008. IEEE Symposium on

Conference_Location

Tianjin

Print_ISBN

978-1-4244-3694-1

Electronic_ISBN

978-1-4244-2972-1

Type

conf

DOI

10.1109/AMIGE.2008.ECP.13

Filename

4721455