The risk management of derivative portfolios is vulnerable to model error. This paper explores risk management strategies based on no-arbitrage bounds, which are independent of any model. In particular, we determine the bounds on the price of a general barrier option given the price of a set of...

We develop a model of the Pension Protection Fund (PPF), a defined benefit pension guarantee system for the UK, based on an analogy between pension liabilities and corporate debt obligations. We show that the PPF is likely to face many years of low claims interspersed irregularly with periods of...

In this paper we address the question whether dealers on the London Stock Exchange act strategically. While a large part of the microstructure literature assumes that dealers are constrained to make zero expected profits on each trade we argue that, if dealers can learn valuable information from...

In the presence of proportional transactions costs, the tightest bounds that can be imposed on the price of a call option when the asset price follows a geometric diffusion are those imposed by static portfolio strategies. The price of a call is bounded above by the value of the asset and below...

In dealership markets disclosure of size and price details of public trades is typically incomplete. We examine whether full and prompt disclosure of public-trade details improves the welfare of a risk-averse investor. We analyse a model of dealership market where a market maker first executes a...

The paper analyzes the problem facing an agent who has a long term commodity supply commitment, and who wishes to hedge that commitment using short maturity commodity futures contracts. As time evolves, the agent has to roll the hedge as old futures contracts mature and new futures contracts are...

We present an improved method for inference in linear regressions with overlapping observations. By aggregating the matrix of explanatory variables in a simple way, our method transforms the original regression into an equivalent representation in which the dependent variables are...

In the presence of proportional transactions costs, the tightest bounds which can be imposed on the price of a call option when the asset price follows a geometric diffusion process are those imposed by static portfolio strategies. The price of a call is bounded above by the value of the asset...

A passport option, as introduced and marketed by Bankers Trust, is a call option on the balance of a trading account. The strategy that this account follows is chosen by the option holder, subject to position limits. We derive a simplified form for the price of the passport option using local...

The aim of this article is to find bounds on the prices of exotic derivatives, and in particular the lookback option, in terms of the (market) prices of call options. This is achieved without making explicit assumptions about the dynamics of the price process of the underlying asset, but rather...