Mathematics Colloquium: Mesias Alfeus
Topic: Empirical Performance of an Option Pricing Formula with the Underlying being Prohibited from Short Sell
This paper provides a comprehensive study on how short-selling ban affects the standard option pricing theory. We perform both cross sectional and options time series calibration of the model devised by He and Zhu (2018) by formulating a new closed-form pricing formula for options with the underlying security prohib- ited from short selling while there is at least a correlated asset in the market necessarily not short-sale ban. Our empirical investigation is carried out using data from Australian Option Market segmented into three different sub-periods; the pre-ban period, ban period and post-ban period. A time series of calibration errors is carried out in order to ascertain the ban effect on Black-Scholes pricing model and how this has been reconciled in the new pricing mechanism.
About the speaker
Dr Mesias Alfeus - University of Wollongong
Dr Mesias Alfeus is a Lecturer of Financial Mathematics at the University of Wollongong (UOW), Australia. He is a PhD graduate from the University of Technology Sydney (UTS) with a dissertation entitled “Stochas- tic Modelling of New Phenomena in Financial Markets” under the supervision of Professor Erik Schlögl. He holds masters and honours degrees in Mathematics both with Cum Laude from Stellenbosch University, South Africa. He previously worked as a Risk Analyst at Namibian Financial Institutions Supervisory Authority (NAMFISA). His current research interests focus on Computational and Mathematical Finance, more specifically in the area of numerical methods for pricing of options and model calibration including model empirical analysis.