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Bachelor Thesis in Applied Mathematics with Specilaization in Analytical Finance: Short Maturity Asymptotic Expansions for Pricing American Put Options in a model with Stochastic Volatility and Stochastic Interest Rate.
Mälardalen University, School of Education, Culture and Communication.
2009 (English)Independent thesis Basic level (degree of Bachelor), 10 credits / 15 HE creditsStudent thesis
##### Abstract [en]

In this thesis, we will be studying the short-maturity asymptotic analysis of American put option in a so-called multifactor model introduced by Medvedev and Scaillet (2009). In such a multifactor model, the underlying stock price is assumed to follow the same stochastic process as in the classical Black-Scholes model. In addition, the volatility and interest rates are not constant any more, they are also assumed to follow some stochastic processes. In Medvedev & Scaillet (2009), a short-maturity asymptotic analysis of American put price in the multifactor model has been carried out and a general formula for the asymptotic expansion of price is given. However, the explicit formula for the coefficients in the expansion is not provided. In this thesis, we examine and extend the asymptotic analysis done by the aforementioned scholars and determine the coefficients of the expansion. The main result of the thesis is a 2nd order asymptotic expansion for the American put with the explicit formula for the coefficients given.

2009. , p. 20
##### Identifiers
OAI: oai:DiVA.org:mdh-9440DiVA, id: diva2:306271
##### Presentation
2009-12-01, U2-036, 13:15 (English)

##### Examiners
Available from: 2010-04-08 Created: 2010-03-29 Last updated: 2010-04-08Bibliographically approved

#### Open Access in DiVA

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##### By organisation
School of Education, Culture and Communication

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Cite
Citation style
• apa
• ieee
• modern-language-association-8th-edition
• vancouver
• Other style
More styles
Language
• de-DE
• en-GB
• en-US
• fi-FI
• nn-NO
• nn-NB
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• Other locale
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• text
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