Junior String Theory Seminar

Ever wondered how ideas from physics can used in real-world scenarios? Come to this talk to understand what is an option and how they are traded in markets. I will recall some basic notions of stochastic calculus and derive the Black-Scholes (BS) equation for plain vanilla options. The BS equation can be solved using standard path integral techniques, that also allow to price more exotic derivatives. Finally, I will discuss whether the assumptions behind Black-Scholes dynamics are reasonable in real-world markets (spoiler: they're not), volatility smiles and term structures of the implied volatility.

Junior Strings is a seminar series where DPhil students present topics of common interest that do not necessarily overlap with their own research area. This is primarily aimed at PhD students and post-docs but everyone is welcome.