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Robust Hedging in Incomplete Markets
Shen, Sally - 2018
We develop a robust optimal dynamic hedging strategy that takes both downside risks and market incompleteness into … hedging can be decreased by following the robust strategy …
Persistent link: https://www.econbiz.de/10012937482
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Closed-Form Solutions for Options in Incomplete Markets
Floroiu, Oana - 2014
for the price of the option and find that, contrary to Black-Scholes (1973) options theory, increasing the volatility of …
Persistent link: https://www.econbiz.de/10013066164
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Pricing and Hedging Guaranteed Annuity Options via Static Option Replication
Pelsser, Antoon - 2002
In this paper we derive a market value for Guaranteed Annuity Optionusing martingale modeling techniques. Furthermore, we show how to construct a static replicating portfolio of vanillainterest rate swaptions that replicates the Guaranteed Annuity Option. Finally, we illustrate with historical...
Persistent link: https://www.econbiz.de/10010325024
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A Comparison of Single Factor Markov-functional and Multi Factor Market Models
Pietersz, Raoul; Pelsser, Antoon - EconWPA - 2005
We compare single factor Markov-functional and multi factor market models for hedging performance of Bermudan swaptions …. We show that hedging performance of both models is comparable, thereby supporting the claim that Bermudan swaptions can …
Persistent link: https://www.econbiz.de/10005561593
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Pricing and Hedging Guaranteed Annuity Options via Static Option Replication
Pelsser, Antoon - Tinbergen Instituut - 2002
In this paper we derive a market value for Guaranteed Annuity Optionusing martingale modeling techniques. Furthermore, we show how to construct a static replicating portfolio of vanillainterest rate swaptions that replicates the Guaranteed Annuity Option. Finally, we illustrate with historical...
Persistent link: https://www.econbiz.de/10011255515
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Fast drift approximated pricing in the BGM model
Pietersz, Raoul; Pelsser, Antoon; Regenmortel, Marcel van - EconWPA - 2005
This paper shows that the forward rates process discretized by a single time step together with a separability assumption on the volatility function allows for representation by a low-dimensional Markov process. This in turn leads to e±cient pricing by for example finite differences. We then...
Persistent link: https://www.econbiz.de/10005413044
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Risk Managing Bermudan Swaptions in the Libor BGM Model
Pietersz, Raoul; Pelsser, Antoon - EconWPA - 2005
This article presents a novel approach for calculating swap vega per bucket in the Libor BGM model. We show that for some forms of the volatility an approach based on re-calibration may lead to a large uncertainty in estimated swap vega, as the instantaneous volatility structure may be distorted...
Persistent link: https://www.econbiz.de/10005413113
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Markov-functional interest rate models
Kennedy, Joanne; Hunt, Phil; Pelsser, Antoon - In: Finance and Stochastics 4 (2000) 4, pp. 391-408
We introduce a general class of interest rate models in which the value of pure discount bonds can be expressed as a functional of some (low-dimensional) Markov process. At the abstract level this class includes all current models of practical importance. By specifying these models in...
Persistent link: https://www.econbiz.de/10005390650
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Pricing double barrier options using Laplace transforms
Pelsser, Antoon - In: Finance and Stochastics 4 (2000) 1, pp. 95-104
In this paper we address the pricing of double barrier options. To derive the density function of the first-hit times … derive pricing formulÖfor new types of barrier options: knock-out barrier options which pay a rebate when either one of the … barriers is hit. Furthermore we discuss more complicated types of barrier options like double knock-in options. …
Persistent link: https://www.econbiz.de/10005390705
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Pricing and Hedging Guaranteed Annuity Options via Static Option Replication
Pelsser, Antoon - Tinbergen Institute - 2002
In this paper we derive a market value for Guaranteed Annuity Option using martingale modeling techniques. Furthermore, we show how to construct a static replicating portfolio of vanilla interest rate swaptions that replicates the Guaranteed Annuity Option. Finally, we illustrate with historical...
Persistent link: https://www.econbiz.de/10005144511