Grant: Discovery Grants Program - Individual
York University
$12,000.00
Solvable models in option pricing and credit risk
FY 2009-10
Summary
The Science of Mathematical Finance deals with problems in financial markets, such as investing, hedging, pricing and risk management. Over the last 30 years ideas and methods of Math Finance have been adopted by the leading banks, insurance companies and pension funds around the globe and have become essential for the efficient operation of financial markets.
At the heart of Mathematical Finance lies the modelling of financial data. A good model should be realistic and computationally efficient at the same time. Those models which have explicit formulas for important quantities (such as the prices of European options) are called "solvable" and are the most popular in the industry. The problem is that there are just a few solvable models and most of them are just too simple to capture the phenomena observed in market data. The work I propose to do is to construct new solvable stochastic models (and classify existing ones), which might be better suited for the particular problems in math finance, as well as other areas in applied science. This research lies at the intersection of several branches of science, such as applied mathematics, theory of stochastic processes and theory of special functions. The possible applications of these new solvable models in Mathematical Finance include pricing of American type options, exotic options, credit risk modelling, interest rate and stochastic volatility modelling.
Program
Discovery Grants Program - Individual
Recipient
Location
Ontario, Canada
Recipient Type
Academia
Type
Grant
Source
NSERC's Awards Data
As published
Application id
341233-2007
Name nom
Kuznetsov, Alexey
Department département
Mathematics and Statistics
Organization id
38
Institution établissement
York University
Province en
Ontario
Province fr
Ontario
Country en
CANADA
Country fr
CANADA
Fiscal year exercice financier
2009
Competition year année de concours
2007
Award amount
12000
Program id
RGPIN
Program nane en
Discovery Grants Program - Individual
Program name fr
Programme de subventions à la découverte - individuelles
Group en
Discovery grants programs
Group fr
Programmes de subventions à la découverte
Committee code
337
Committee name en
Pure & Applied Maths - B
Committee name fr
Maths pures et appliquées - B
Area of application code
1205
Area of application group en
Advancement of knowledge
Area of application group fr
Avancement des connaissances
Area of application en
Mathematical sciences
Area of application fr
Sciences mathématiques
Research subject code
3008
Research subject group en
Statistics and probability
Research subject group fr
Statistique et probabilité
Research subject en
Applied probability
Research subject fr
Probabilité appliquée
Partie
3
Nb partie
5
Application title
Solvable models in option pricing and credit risk
Keyword
NA
Application summary
The Science of Mathematical Finance deals with problems in financial markets, such as investing, hedging, pricing and risk management. Over the last 30 years ideas and methods of Math Finance have been adopted by the leading banks, insurance companies and pension funds around the globe and have become essential for the efficient operation of financial markets.
At the heart of Mathematical Finance lies the modelling of financial data. A good model should be realistic and computationally efficient at the same time. Those models which have explicit formulas for important quantities (such as the prices of European options) are called "solvable" and are the most popular in the industry. The problem is that there are just a few solvable models and most of them are just too simple to capture the phenomena observed in market data. The work I propose to do is to construct new solvable stochastic models (and classify existing ones), which might be better suited for the particular problems in math finance, as well as other areas in applied science. This research lies at the intersection of several branches of science, such as applied mathematics, theory of stochastic processes and theory of special functions. The possible applications of these new solvable models in Mathematical Finance include pricing of American type options, exotic options, credit risk modelling, interest rate and stochastic volatility modelling.