DOIONLINE

DOIONLINE NO - IJMAS-IRAJ-DOIONLINE-7470

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International Journal of Management and Applied Science (IJMAS)-IJMAS
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Volume Issue
Issue
Volume-3,Issue-3   ( Mar, 2017 )
Paper Title
Derivatives Pricing with Spectrum Analysis
Author Name
Pierre Rostan, Alexandra Rostan
Affilition
American University in Cairo, Department of Management, AUC Avenue, P.O. Box 74, New Cairo 11835, Egypt
Pages
162-166
Abstract
Spectrum analysis works well on waveform time series, especially stationary time series. Unfortunately, many financial time series are non-stationary, for example time series of index prices. In this paper, we transform a non-stationary time series of index prices into stationary, we apply wavelet extension to this transformed time series in order to forecast index prices underlying derivatives, then we price derivatives using the forecasted value as input of the payment function. Results are compared to derivatives intrinsic values, to market prices and to an analytical solution. Keywords- Derivatives pricing; spectrum analysis, wavelet analysis.
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