#TITLE_ALTERNATIVE#

• Main Author: NURUL KAMILAH( NIM : 20111304)PEMBIMBING : Dr Kuntjoro Adji Sidarto, WULAN
• Format: Theses
• Language: Indonesia
• Online Access: https://digilib.itb.ac.id/gdl/view/19694
• Institution: Institut Teknologi Bandung

Many empirical studies show the negative correlation between stock price changes <br /> <br /> <br /> <br /> <br /> and volatility changes. The Constant Elasticity of Variance (CEV), originally devel- <br /> <br /> <br /> <br /> <br /> oped by Cox,incorporates this negative correlation. There was a closed form solution <br /> <br /> <br /> <br /> <br /> derived by Cox, for pricing standard European option under CEV process, and for <br /> <br /> <br /> <br /> <br /> pricing European lookback option, we will use binomial approximation developed <br /> <br /> <br /> <br /> <br /> by Nelson and Ramaswamy (1990), and pricing algorithms developed by Costabile <br /> <br /> <br /> <br /> <br /> (2006). The results show the difierences between pricing option under CEV process <br /> <br /> <br /> <br /> <br /> and lognormal assumption, and of course it is much more important to have the <br /> <br /> <br /> <br /> <br /> correct model specification for estimate the option prices.