Fin & math doc seminar

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14 October 2014
12:15-13:00

Ariel Neufeld

Event Details

Title	Nonlinear Lévy Processes and their Characteristics
Speaker, Affiliation	Ariel Neufeld,
Date, Time	14 October 2014, 12:15-13:00
Location	KOL G 209
Abstract	We develop a general construction for nonlinear Lévy processes with given characteristics. More precisely, given a set Theta of Lévy triplets, we construct a sublinear expectation on Skorohod space under which the canonical process has stationary independent increments and a nonlinear generator corresponding to the supremum of all generators of classical Lévy processes with triplets in Theta. The nonlinear Lévy process yields a tractable model for Knightian uncertainty about the distribution of jumps for which expectations of Markovian functionals can be calculated by means of a partial integro-differential equation. The talk is based on joint work with Marcel Nutz.

Nonlinear Lévy Processes and their Characteristicsread_more

KOL G 209

4 November 2014
12:15-13:00

Lujing Su

Event Details

Title	Collateral Smile
Speaker, Affiliation	Lujing Su,
Date, Time	4 November 2014, 12:15-13:00
Location	KOL G 209
Abstract	We analyze the impact of funding costs and margin requirements on index options traded on the CBOE. Assuming differential borrowing and lending rates, we derive no-arbitrage bounds for European options. We show that funding costs and the CBOE's margin requirements lead to a price increase, which translates into skew and smile patterns for implied volatility curves even under constant volatilities. Empirical tests confirm that our model-implied slopes have significant statistical power in explaining the slopes observed in the market. Hence, at least in part, funding costs and collateral requirements offer an institutional explanation of the volatility smile phenomenon.

Collateral Smileread_more

KOL G 209

9 December 2014
12:15-13:00

Dr. Oleg Reichmann

Event Details

Title	Non-standard approach for pricing of American options
Speaker, Affiliation	Dr. Oleg Reichmann,
Date, Time	9 December 2014, 12:15-13:00
Location	KOL G 209
Abstract	Non-standard approach for pricing of American options Fast and accurate pricing of American options in general market models remains a major challenge in option pricing. We develop a method inspired by the work of Sören Christensen (A Method for Pricing American Options Using Semi-Infinite Linear Programming, Mathematical Finance, 2014) and Jan Kallsen. We exploit the fact that European type contracts can be priced in closed form (or in semi-closed form) in many typical market models and approximate the value of an American option (in the continuation region) by a corresponding European option. Thus, we reduce the pricing of an American option, which corresponds to the solution of a semilinear parabolic PDE, to the solution of a sequence of linear PDEs. We provide preliminary analytic results and numerical experiments demonstrating the applicability of the method. This is joint work with Josef Teichmann.

Non-standard approach for pricing of American optionsread_more

KOL G 209

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Organizers: Martin Herdegen

Archive: SS 15 AS 14 SS 14 AS 13 SS 13 AS 12