Mathematical Finance and Probability Seminars (Since covid these events are taking place online.)

We investigate modelling volatility surfaces using the alpha-stable Levy motion as the driving term in asset price uncertainty. The main motivation comes from natural generalization of Black-Scholes theory into the category of infinite activity jump processes, which enables one for more realistic modelling of stochastic dynamics observed in the market.

We derive the partial integro-differential equation connected with option price, discuss the existence and uniqueness of the solution of the latter equation and provide examples of volatility smiles obtained from numerically derived option prices.

Speaker: Andrea Karlova, Charles University, Prague

Slides: (TBA)