– Analyze any of the model’s extensions
You are required to write a 2,000 word essay on any of the extensions to the Black and Scholes model. You are required to choose a model (it can be one of the models studied in the BE351 module or any other model – see for instance Hull’s book), present its main characteristics and a brief mathematical derivation, its advantages/disadvantages including any empirical tests carried out with this model, and a brief conclusion. Hull’s book is a good starting point but the essay should not be limited to one book – you need to show evidence of use of a variety of sources (a research of the available literature is required for that).
Hull, J. C., 2012, Options, Futures, and Other Derivatives, 8th edition, Prentice Hall, ISBN: 0273759078, this is our professor’s book choice.