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Mathematical Sciences Colloquium by Svetlozar Rachev
Friday, Nov 17, 2017
2 p.m. - 2:50 p.m. Location: FN 2.102

Svetlozar Rachev

Texas Tech University

Option Pricing with Greed and Fear Factor: The Rational Finance Approach

We explain main concepts of Prospect Theory and Cumulative Prospect Theory within the framework of the rational dynamic asset pricing theory. We derived  option pricing formulas when the asset returns are altered with a generalized Prospect Theory value function or a modified Prelec’s probability weighting function. We study the behavioral finance notion of “greed and fear” from the point of view of the rational dynamic asset pricing theory and derived the corresponding option pricing formulas in case of asset returns following continuous diffusion or discrete binomial trees.


Coffee to be served in FN 2.102 30 minutes prior to the colloquium.


Sponsored by the Department of Mathematical Sciences

Contact Info:
Viswanath Ramakrishna, 972-883-6873
Questions? Email me.

Tagged as Lectures/Seminars, Professional Dev.
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