Title page for ETD etd-05262006-111821

Type of Document Master's Thesis
Author Li, Wei-Hsien
URN etd-05262006-111821
Title Index Future Pricing under Imperfect Market and Stochastic Volatility
Degree Master of Science (M.S.)
Department Mathematics
Advisory Committee
Advisor Name Title
Hui-Hsiung Kuo Committee Chair
Padmanabhan Sundar Committee Member
William R. Lane Committee Member
  • stochastic volatility
  • market imperfection
  • index future pricing
Date of Defense 2006-05-15
Availability unrestricted
Financial markets in emerging countries are volatile and imperfect, so pricing model under traditional perfect-market frameset may not give reliable price of financial derivatives. The most famous pricing model for stock index future is the cost of carry model. The mis-pricing of cost of carry model inspires lots of following researches. Even transaction costs, dividends, stochastic interest rate, stochastic volatility, market imperfection, and other factors are considered, we still do not obtain a model price consistently better than cost of carry model. But these researches offer important insights, for example, the market needs time to mature and the more complex model usually perform better than cost of carry model in relatively imperfect or volatile markets. Therefore, a model extended from these literatures should still be useful in particular markets. Here I will propose a two-factor stock-index future pricing model includes stochastic volatility of spot index with imperfect financial market framework. The pricing formula may not have a close form solution, so I would use the finite difference method to approximate the solution.

The thesis is organized as follows, after introduction I will review the pricing models for the index futures in Chapter 2. In Chapter 3 the two-factor model is derived, and the solution is proposed. The empirical issues about this model are then proposed in Chapter 4. The conclusion and suggestion are in Chapter 5.

  Filename       Size       Approximate Download Time (Hours:Minutes:Seconds) 
 28.8 Modem   56K Modem   ISDN (64 Kb)   ISDN (128 Kb)   Higher-speed Access 
  Li_thesis.pdf 232.32 Kb 00:01:04 00:00:33 00:00:29 00:00:14 00:00:01

Browse All Available ETDs by ( Author | Department )

If you have more questions or technical problems, please Contact LSU-ETD Support.