Title page for etd-0808105-124932


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URN etd-0808105-124932
Author Chi-hsien Lin
Author's Email Address No Public.
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Department Applied Mathematics
Year 2004
Semester 2
Degree Master
Type of Document
Language zh-TW.Big5 Chinese
Title Modeling the Bid-Ask Spread by Option Hedging
Date of Defense 2005-07-20
Page Count 33
Keyword
  • option hedging
  • high frequency data
  • the bid-ask spread
  • EM algorithm
  • Abstract The bid-ask spread costs consist of three components, which include order processing costs, inventory-holding costs, and adverse selection costs. In this paper, we model the inventory-holding costs of the bid-ask spread by option hedging. Theinventory-holding costs are hedged by call or put option positions. Since trades deal with the adverse selection traders are unobservable. We treat it as a latent variable, and Expected-Maximization (EM) algorithm are applied to estimate the related parameters of the model. Simulation studies are performed for several different
    models. Empirical results of NYSE high frequency data show that the proposed model are obtain appropriate parameter estimation when the returns satisfied normality assumption.
    Advisory Committee
  • Mong-Na Lo Huang - chair
  • Fu-Chuen Chang - co-chair
  • Mei-Hui Guo - advisor
  • Files
  • etd-0808105-124932.pdf
  • indicate in-campus access in a year and off_campus not accessible
    Date of Submission 2005-08-08

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