11am, Monday March 13th, 2006
M350 (Building 28)
On the existence of non-constant volatility in the Black-Scholes and Bachelier formulae
Dr Kais Hamza
School of Mathematical Sciences, Monash University
In this talk we prove that if the Black-Scholes formula holds
with the spot volatility for call options with all strikes, then the volatility
parameter is constant. We also prove that this is not the case in the Bachelier model.
The alternative process in the Bachelier case has intriguing sample paths behaviour.
Convenor:Aidan Sudbury