The following questions have to be answered in 600-700 words per question:
1) Investigate the accuracy and efficiency of convergence of different branching methods of calculating options prices.
Your investigation should include the CRR Binomial Model, the Tian Shift Model and the Trinomial Model.
Your investigation should include an analysis of how may branches are needed to produce a given level of accuracy in each method and an explanation of why you think this is the case.
2) Investigate the efficacy of different option pricing models in explaining real world option prices
Your investigation should include the Black-Scholes, Gram-Charlier and Heston Stochastic Volatility Models and should include a comparison of the implied volatilities under each model with the implied volatility taken from real world option pricing data.
3) Build stochastic volatility into the CRR Binomial Model;
I have programmed all vba codes needed for those questions, the xorresponding excel sheets are uploaded in a zip file. The calculations needed for the report should be done in excel and the report should include some supporting graphs/figures.
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