🎓Graduate Thesis

My second year of the program focused on completing my graduate thesis. It is tentatively titled Optimal Repositioning of Net Credit Multi-Leg Options Strategies. I am grateful to be advised by Prof. Tim Leung. It was my focus for my final two quarters.

My research employs numerical solutions to optimal stopping problems in strategies involving the buying and selling of multiple options simultaneously, on the same underlying stock. In particular I am looking at the net credit varieties of the iron condor and iron butterfly. I seek to answer the question:

If you allowed yourself to adjust this strategy only once during its its lifetime, when should you do it, and by how much?

This question is answered by setting up a variational inequality using a Snell envelope to compare the expected value of action vs. inaction. This is done rigorously by employing a stochastic volatility model under the conditions of American options that consider the possibility of early exercising.

The greatest part of the experience was being able to share in the work with bright undergraduate students who volunteered to assist in the research. You-Ruei Hsu, Patricia Dao, and Thomas Zeng contributed greatly by assisting in the literature review and setting aside time for me to explain it to them as I was working on it, serving as a much needed sanity check.