AbstractsMathematics

Polynomial-Normal extension of Black-Scholes model

by Hao Li




Institution: University of Alberta
Department: Department of Mathematical and Statistical Science
Degree: MS
Year: 2009
Keywords: Black-Scholes; Polynomial-Normal; Gram-Charlier
Record ID: 1860536
Full text PDF: http://hdl.handle.net/10048/688


Abstract

Black-Scholes Model is a widely used mathematical model for stock price behaviors, of which the return is assumed to be normally distributed. But this 'normally distributed' assumption is doubted and proved to be not true by realistric data. The main goal of this thesis is to explore polynomial-normal distribution, and use this distribution in the stock return, as a non-normal extension of the Black-Scholes Model. We will develop the properties of polynomial-normal distribtuion in the thesis, and also give the European call and put option price formulas under this model, and show how to use this model to estimate real stock returns.