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Program Type: 
Thesis
Non Thesis
Course Code: 
FE 623
P: 
3
Lab: 
0
Credits: 
3
ECTS: 
10
Course Language: 
English
Course Content: 

Stochastic processes and filters, process classes, Markov processes, Martingales, finite and infinite variation processes, characteristic functions, stochastic integrals and stochastic differential equations (SDE), Equivalent martingale scale, pricing formulas for European options, Black-Scholes model flaws,

Levy processes: Definition and properties, Examples of Levy processes: Poisson process, Compound Poisson process, Gamma process, Inverse Gaussian process, Generalized Inverse Gaussian process, Variance-Gamma process,  Normal Inverse Gaussian process, CGMY process, Meixner process, Generalized Hyperbolic process.

Asset pricing models driven by Levy processes: parameter estimation, Levy market model, pricing formulas for European options.

Levy models with stochastic volatility: BNS model, BNS model with Gamma stochastic volatility, simulation techniques for Levy models.

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