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Symmetry based Semi-Static Hedging Strategies for several Multi-Asset Options with Barriers
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When
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5.15 on Thursday 6th May 2010
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Where
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B617, Leverhulme Library, Columbia House
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Presentations
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Speaker
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Michael Schmutz
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From
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University of Bern
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Abstract
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It turns out that very important options have natural model independent geometric interpretations connecting convex geometry with financial derivatives. Based on these observations several extensions of a well-known univariate result by Breeden and Litzenberger can easily be provided. These results then show that extensively analysed one-dimensional symmetry results from the theory of financial derivatives have a direct geometric translation, which reduces them to the symmetry of certain convex sets associated with the asset prices at maturity. This leads to natural extensions in the multi-asset setting, which are explored in the talk. It is shown how to characterise distributions that feature these symmetries and important closely related quasi-symmetry properties.
As a first main application so-called semi-static hedging strategies for several multi-asset options with certain barriers can be derived. Particular attention is devoted to the case of asset prices driven by Lévy processes.
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For further information
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Sabina Allam (Postgraduate Administrator) Ext. 6879
Department of Statistics, Columbia House
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