Good Deal Hedging and Valuation Under Combined Uncertainty About Drift and Volatility PDF Download
Are you looking for read ebook online? Search for your book and save it on your Kindle device, PC, phones or tablets. Download Good Deal Hedging and Valuation Under Combined Uncertainty About Drift and Volatility PDF full book. Access full book title Good Deal Hedging and Valuation Under Combined Uncertainty About Drift and Volatility by Dirk Becherer. Download full books in PDF and EPUB format.
Author: Dirk Becherer
Publisher:
ISBN:
Category :
Languages : en
Pages :
Get Book Here
Book Description
We derive robust good-deal hedges and valuations under combined model ambiguity about the drift and volatility of asset prices for incomplete markets. Good-deal valuations are determined such that not just opportunities for arbitrage but also for overly attractive reward-to-risk ratios are excluded, by restricting instantaneous Sharpe ratios for any market extension by derivatives. From a finance point of view, this permits for hedges and valuation bounds than are less extreme (respectively expensive) than those from the more fundamental approach of almost-sure superhedging and its corresponding no-arbitrage bounds. In mathematical terms, it demands however that not just ambiguities about the volatility but also about the drift become relevant. For general measurable contingent claims, possibly path-dependent, the solutions are described by 2nd-order backward stochastic differential equations with non-convex drivers, building on recent research progress on non-linear kernels. Hedging strategies are robust with respect to uncertainty in the sense that their tracking errors satisfy a supermartingale property under all a-priori valuation measures, uniformly over all priors.
Author: Dirk Becherer
Publisher:
ISBN:
Category :
Languages : en
Pages :
Get Book Here
Book Description
We derive robust good-deal hedges and valuations under combined model ambiguity about the drift and volatility of asset prices for incomplete markets. Good-deal valuations are determined such that not just opportunities for arbitrage but also for overly attractive reward-to-risk ratios are excluded, by restricting instantaneous Sharpe ratios for any market extension by derivatives. From a finance point of view, this permits for hedges and valuation bounds than are less extreme (respectively expensive) than those from the more fundamental approach of almost-sure superhedging and its corresponding no-arbitrage bounds. In mathematical terms, it demands however that not just ambiguities about the volatility but also about the drift become relevant. For general measurable contingent claims, possibly path-dependent, the solutions are described by 2nd-order backward stochastic differential equations with non-convex drivers, building on recent research progress on non-linear kernels. Hedging strategies are robust with respect to uncertainty in the sense that their tracking errors satisfy a supermartingale property under all a-priori valuation measures, uniformly over all priors.
Author: Samuel N. Cohen
Publisher: Springer Nature
ISBN: 3030222853
Category : Mathematics
Languages : en
Pages : 300
Get Book Here
Book Description
This collection of selected, revised and extended contributions resulted from a Workshop on BSDEs, SPDEs and their Applications that took place in Edinburgh, Scotland, July 2017 and included the 8th World Symposium on BSDEs. The volume addresses recent advances involving backward stochastic differential equations (BSDEs) and stochastic partial differential equations (SPDEs). These equations are of fundamental importance in modelling of biological, physical and economic systems, and underpin many problems in control of random systems, mathematical finance, stochastic filtering and data assimilation. The papers in this volume seek to understand these equations, and to use them to build our understanding in other areas of mathematics. This volume will be of interest to those working at the forefront of modern probability theory, both established researchers and graduate students.
Author: Dirk Becherer
Publisher:
ISBN:
Category :
Languages : en
Pages :
Get Book Here
Book Description
We study a notion of good-deal hedging, that corresponds to good-deal valuation and is described by a uniform supermartingale property for the tracking errors of hedging strategies. For generalized good-deal constraints, defined in terms of correspondences for the Girsanov kernels of pricing measures, constructive results on good-deal hedges and valuations are derived from backward stochastic differential equations, including new examples with explicit formulas. Under model uncertainty about the market prices of risk of hedging assets, a robust approach leads to a reduction or even elimination of a speculative component in good-deal hedging, which is shown to be equivalent to a global risk-minimization in the sense of Föllmer and Sondermann (1986) if uncertainty is sufficiently large.
Author: George J Kaye
Publisher: World Scientific Publishing Company
ISBN: 1908979585
Category : Business & Economics
Languages : en
Pages : 438
Get Book Here
Book Description
Along with the extraordinary growth in the derivatives market over the last decade, the impact of model choice, and model parameter usage, has become a major source of valuation uncertainty. This book concentrates on equity derivatives and charts, step by step, how key assumptions on the dynamics of stocks impact on the value of exotics. The presentation is technical, but maintains a strong focus on intuition and practical application./a
Author: Robert Buff
Publisher: Springer Science & Business Media
ISBN: 3642563236
Category : Mathematics
Languages : en
Pages : 246
Get Book Here
Book Description
This is one of the only books to describe uncertain volatility models in mathematical finance and their computer implementation for portfolios of vanilla, barrier and American options in equity and FX markets. Uncertain volatility models place subjective constraints on the volatility of the stochastic process of the underlying asset and evaluate option portfolios under worst- and best-case scenarios. This book, which is bundled with software, is aimed at graduate students, researchers and practitioners who wish to study advanced aspects of volatility risk in portfolios of vanilla and exotic options. The reader is assumed to be familiar with arbitrage pricing theory.
Author: Petter L. Skantze
Publisher: Springer Science & Business Media
ISBN: 146151701X
Category : Technology & Engineering
Languages : en
Pages : 220
Get Book Here
Book Description
The challenges currently facing particIpants m competitive electricity markets are unique and staggering: unprecedented price volatility, a crippling lack of historical market data on which to test new modeling approaches, and a continuously changing regulatory structure. Meeting these challenges will require the knowledge and experience of both the engineering and finance communities. Yet the two communities continue to largely ignore each other. The finance community believes that engineering models are too detailed and complex to be practically applicable in the fast changing market environment. Engineers counter that the finance models are merely statistical regressions, lacking the necessary structure to capture the true dynamic properties of complex power systems. While both views have merit, neither group has by themselves been able to produce effective tools for meeting industry challenges. The goal of this book is to convey the fundamental differences between electricity and other traded commodities, and the impact these differences have on valuation, hedging and operational decisions made by market participants. The optimization problems associated with these decisions are formulated in the context of the market realities of today's power industry, including a lack of liquidity on forward and options markets, limited availability of historical data, and constantly changing regulatory structures.
Author: Steve L. Allen
Publisher: John Wiley & Sons
ISBN: 111817545X
Category : Business & Economics
Languages : en
Pages : 612
Get Book Here
Book Description
A top risk management practitioner addresses the essential aspects of modern financial risk management In the Second Edition of Financial Risk Management + Website, market risk expert Steve Allen offers an insider's view of this discipline and covers the strategies, principles, and measurement techniques necessary to manage and measure financial risk. Fully revised to reflect today's dynamic environment and the lessons to be learned from the 2008 global financial crisis, this reliable resource provides a comprehensive overview of the entire field of risk management. Allen explores real-world issues such as proper mark-to-market valuation of trading positions and determination of needed reserves against valuation uncertainty, the structuring of limits to control risk taking, and a review of mathematical models and how they can contribute to risk control. Along the way, he shares valuable lessons that will help to develop an intuitive feel for market risk measurement and reporting. Presents key insights on how risks can be isolated, quantified, and managed from a top risk management practitioner Offers up-to-date examples of managing market and credit risk Provides an overview and comparison of the various derivative instruments and their use in risk hedging Companion Website contains supplementary materials that allow you to continue to learn in a hands-on fashion long after closing the book Focusing on the management of those risks that can be successfully quantified, the Second Edition of Financial Risk Management + Websiteis the definitive source for managing market and credit risk.
Author: Nassim Nicholas Taleb
Publisher: John Wiley & Sons
ISBN: 9780471152804
Category : Business & Economics
Languages : en
Pages : 536
Get Book Here
Book Description
Destined to become a market classic, Dynamic Hedging is the only practical reference in exotic options hedgingand arbitrage for professional traders and money managers Watch the professionals. From central banks to brokerages to multinationals, institutional investors are flocking to a new generation of exotic and complex options contracts and derivatives. But the promise of ever larger profits also creates the potential for catastrophic trading losses. Now more than ever, the key to trading derivatives lies in implementing preventive risk management techniques that plan for and avoid these appalling downturns. Unlike other books that offer risk management for corporate treasurers, Dynamic Hedging targets the real-world needs of professional traders and money managers. Written by a leading options trader and derivatives risk advisor to global banks and exchanges, this book provides a practical, real-world methodology for monitoring and managing all the risks associated with portfolio management. Nassim Nicholas Taleb is the founder of Empirica Capital LLC, a hedge fund operator, and a fellow at the Courant Institute of Mathematical Sciences of New York University. He has held a variety of senior derivative trading positions in New York and London and worked as an independent floor trader in Chicago. Dr. Taleb was inducted in February 2001 in the Derivatives Strategy Hall of Fame. He received an MBA from the Wharton School and a Ph.D. from University Paris-Dauphine.
Author: Thierry Roncalli
Publisher: CRC Press
ISBN: 1351385224
Category : Business & Economics
Languages : en
Pages : 987
Get Book Here
Book Description
Developed over 20 years of teaching academic courses, the Handbook of Financial Risk Management can be divided into two main parts: risk management in the financial sector; and a discussion of the mathematical and statistical tools used in risk management. This comprehensive text offers readers the chance to develop a sound understanding of financial products and the mathematical models that drive them, exploring in detail where the risks are and how to manage them. Key Features: Written by an author with both theoretical and applied experience Ideal resource for students pursuing a master’s degree in finance who want to learn risk management Comprehensive coverage of the key topics in financial risk management Contains 114 exercises, with solutions provided online at www.crcpress.com/9781138501874
Author: Jeroen F. J. De Munnik
Publisher: Routledge
ISBN: 113477592X
Category : Business & Economics
Languages : en
Pages : 195
Get Book Here
Book Description
The increased volatility of interest rates during recent years and the corresponding introduction of a variety of interest rate derivative securities like bond options, futures and embedded options in mortgages, underlines the need for a comprehensive financial theory to determine values of fixed income instruments and derivative securities consistently. This book provides: * a detailed overview and classification of the different approaches to value interest rate dependent securities * a comparison of the numerical approaches to value complex securities * an empirical examination for the Dutch Fixed Income Market of some well-known interest rate models which demonstrates recent improvements to describe interest rate movements in relation to contingent claim valuation.
