Title page for ETD etd-06112008-162807


Document Type Master's Dissertation
Author Bambe Moutsinga, Claude Rodrigue
Email claude.bambe@up.ac.za
URN etd-06112008-162807
Document Title Transform analysis of affine jump diffusion processes with applications to asset pricing
Degree MSc (Mathematics of Finance)
Department Mathematics and Applied Mathematics
Supervisor
Advisor Name Title
Mr A J van Zyl Supervisor
Keywords
  • asset pricing
  • financial instrument
  • affine jump diffusion
  • option pricing
Date 2008-04-11
Availability unrestricted
Abstract

This work presents a class of models in asset pricing, whose underlying has dynamics of Affine jump diffusion type. We first present L´evy processes with their properties. We then introduce Affine jump diffusion processes which are basically a particular class of L´evy processes. Our motivation for these is driven by the fact that many financial models are built on them. Affine jump diffusion processes present good analytical properties that allow one to get close form formulas for a wide range of option pricing.

The approach we use here is based on the paper by Duffie D, Pan J, and Singleton K. An example will show how incorporating parameters such as the volatility of the underlying asset in the model, can influence the resulting price of the financial instrument under consideration. We will also show how this class of models incorporate well known models, specially those used to model interest rates dynamics, like for instance the Vasicek model.

© 2008, University of Pretoria. All rights reserved. The copyright in this work vests in the University of Pretoria. No part of this work may be reproduced or transmitted in any form or by any means, without the prior written permission of the University of Pretoria.

Please cite as follows:

Bambe Moutsinga, CR 2008, Transform analysis of affine jump diffusion processes with applications to asset pricing, MSc dissertation, University of Pretoria, Pretoria, viewed yymmdd < http://upetd.up.ac.za/thesis/available/etd-06112008-162807 / >

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