To: Geoffrey Fox
From: Gang Cheng
Subject: Independent Study Proposal

Dear Geoffrey:

I'd like to do independent study under your guidance in this summer semester.
Attached please find the proposal for this course. Kim reviewed
it and agreed to be a working supervisor of my study. 

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. Summary

A set of (parallel) option pricing models have been implemented, which can
run efficiently on parallel machines such as CM2, CM5 and DECmpp-12000.
As an independent study, here I propose to develop an interactive graphical
interface for the option price modelling. This interface would integrate the 
parallel computing resources for the modelling with a run-time user-friendly 
graphical display and provide the model users and researchers with a 
dynamical visulization tool for the model verification and optimization. 
It will also be a good demo program for the financial project at NPAC.

. Background

After a large-scale comparison of the option price models on DECmpp-12000 
using historical market data, we evaluated that a group of models, namely, 
"stochastic volatility model", provide more accurate option price estimates 
than another group of "conventional" models.  We also discovered 
that the "stochastic volatility models" are highly sensitive to a couple of model 
parameters, such as volatility and variance of volatility. 
Those parameters can not be observed directly and can only be estimated either 
from historical data through some optimization method or from financial expertise.

The proposed study is to develop a graphics tool to visulize the modelling process
while allowing parameter estimations either by some optimization method or by
interactive parameter input or by both.
 
. Functionality 

	. A user-friendly window-style graphical interface to provide slide-button 
 	  parameter input and dynamic display of model price curves.

	. To allow parameters input from results generated by parameter optimization
	  method and primitive data from files. 

	. Flexibility to choose one model for a number of stocks or all models for
	  a specified stock.

	. Options to save up results generated in the simulating, to pause the current 
          simulating to see the input/output data, or run in single-step trade

	. Conventional X-window operations, such resize, iconify.

. Product of this study

	. A program implemented on swift(for CM5) and (possibly) magpie 
	  (for DECmpp-12000) and run under X-window environment. Model codes 
	  in Fortran90(existed) and graphical user interface in C using Xlib 
	  (standard X programming). Codes for both  parts are highly portable 
          to any parallel system supporting with Fortran 90 with front-end allowing 
	  X-window programming.

	. A technical report including well documented codes and user directions.