Mathematics of Options Pricing and Hedging
Professor Lucy Kimball
Bentley University
The pricing and hedging of financial options is an active area of research in mathematical finance. Classic approaches rely on assuming a binomial model or a stochastic differential equation for the evolution of the underlying stock price process. Our work is based on an extension of the binomial model to include stock price jumps that fall in a closed interval rather than just the two point distribution assumed by the classic model. This model allows for the development of a unique approach to finding an optimal hedging strategy based on real market data. In this talk I will give an introduction to financial options, some of the mathematical principles underlying classic approaches to pricing and hedging and give an overview of our work. No previous exposure to financial options is required.
Dr. Lucy Kimball is a Professor of Mathematical Sciences at Bentley University. At Bentley she served as Actuarial program Coordinator, Internship Coordinator and Math Club Advisor for many years prior to becoming Chair of the Department of Mathematical Sciences. While chair she was instrumental in developing the department’s undergraduate major in Actuarial Science and graduate degree program in Business Analytics. She is currently the Wilder Teaching Professor and Chair of the Bentley University Learning and Teaching Council.
Dr. Lucy Kimball does research in Mathematical Finance and has over thirty publications on a variety of topics including atmospheric modeling, optimization for large scale problems in electric power systems and mathematical models for pricing and hedging of financial options.
Dr. Lucy Kimball received a Bachelor of Science from the University of Massachusetts, Lowell and received a Master of Science and Doctor of Philosophy from Worcester Polytechnic Institute.
