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Malliavin Calculus for Stochastic Strings with Applications To Barrier Options and Optimal Portfolios

Bueno-Guerrero, Alberto - 2017

We apply the Malliavin calculus to the stochastic string framework and obtain a Clark-Ocone-like formula. This result allows us to rewrite the hedging portfolio explicitly in terms of the Malliavin derivative of the discounted payoff. We illustrate this new result with two applications. Firstly,...

Persistent link: https://www.econbiz.de/10012960764

Black scholes for portfolios of options in discrete time : the price is right, the hedge is wrong

Peeters, Bas; Dert, Cees; Lucas, André - 2003

Taking a portfolio perspective on option pricing and hedging, we show that within the standard Black-Scholes-Merton framework large portfolios of options can be hedged without risk in discrete time. The nature of the hedge portfolio in the limit of large portfolio size is substantially different...

Persistent link: https://www.econbiz.de/10011334345

Hedging Volatility Risk of Exotic Structures Using Variance Derivatives

Zarov, Iliyan Radev - 2012

volatility jump diffusion model …

Persistent link: https://www.econbiz.de/10013113731

Explaining asset pricing puzzles associated with the 1987 market crash

Benzoni, Luca; Collin-Dufresne, Pierre; Goldstein, Robert S. - 2010

The 1987 market crash was associated with a dramatic and permanent steepening of the implied volatility curve for … individual stock options, equity returns, and interest rates. -- Volatility Smile ; Volatility Smirk ; Implied Volatility …

Persistent link: https://www.econbiz.de/10008699179

Principal Measures of Investment Risk : The Price Density Function - A Tool for Finding Volatility, Sensitivity, Duration, Convexity

Mangoro, Tinashe - 2013

used to derive a measure of the volatility of interest rate and also that of the Prices. This is achieved by exploiting the …

Persistent link: https://www.econbiz.de/10013095900

Pricing interest rate derivatives under volatility uncertainty

Holzermann, Julian - 2020

We study the pricing of contracts in fixed income markets in the presence of volatility uncertainty. We consider an … arbitrage-free bond market under volatility uncertainty. The uncertainty about the volatility is modeled by a G-Brownian motion … traditional models with the highest and lowest possible volatility. Due to these pricing formulas, the model naturally exhibits …

Persistent link: https://www.econbiz.de/10012175590