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Delayed Random Walks: Numerical Methods and Applications

PDE and Applied Math Seminar

Speaker: Harish Bhat, UC Merced
Location: 1147 MSB
Start time: Tue, May 8 2012, 3:10PM

The simplest delayed random walk is a modification of the simple random walk in which the direction and magnitude of the walker's step depends on the previous step. We first discuss a numerical method by which the probability mass function for a delayed random random walk can be recovered, up to machine precision, using the fast Fourier transform. We then describe an options pricing theory in which the underlying asset follows a delayed random walk. Comparisons between model prices and real market data will be made