1.

Record Nr.

UNINA9910455554403321

Autore

Maruhn Jan H

Titolo

Robust static super-replication of barrier options [[electronic resource] /] / Jan H. Maruhn

Pubbl/distr/stampa

Berlin ; ; New York, : Walter de Gruyter, c2009

ISBN

1-282-29646-9

9786612296468

3-11-916585-9

3-11-020851-2

Descrizione fisica

1 online resource (209 p.)

Collana

Radon series on computational and applied mathematics, , 1865-3707 ; ; 7

Classificazione

SK 870

Disciplina

332.6322830151962

Soggetti

Options (Finance) - Mathematical models

Hedging (Finance) - Mathematical models

Electronic books.

Lingua di pubblicazione

Inglese

Formato

Materiale a stampa

Livello bibliografico

Monografia

Note generali

"RICAM, Johann Radon Institute for Computational and Applied Mathematics".

Nota di bibliografia

Includes bibliographical references (p. [187]-191) and index.

Nota di contenuto

Frontmatter -- Contents -- 1. Theoretical Background -- 2. Static Hedging of Barrier Options -- 3. An Optimization Approach to Static Super-Replication -- 4. Reformulation as a Semi-Infinite Problem -- 5. Eliminating Model Parameter Uncertainty -- 6. Modifications and Extensions -- 7. Avoiding Model Errors -- 8. Empirical Hedge Performance -- 9. Summary and Outlook -- A. General Existence Theorem -- B. Source Code -- Backmatter

Sommario/riassunto

Static hedge portfolios for barrier options are very sensitive with respect to changes of the volatility surface. To prevent potentially significant hedging losses this book develops a static super-replication strategy with market-typical robustness against volatility, skew and liquidity risk as well as model errors. Empirical results and various numerical examples confirm that the static superhedge successfully eliminates the risk of a changing volatility surface. Combined with associated sub-replication strategies this leads to robust price bounds for barrier options which are also relevant in the context of dynamic



hedging. The mathematical techniques used to prove appropriate existence, duality and convergence results range from financial mathematics, stochastic and semi-infinite optimization, convex analysis and partial differential equations to semidefinite programming.