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Probability and Computational Finance Seminar
Antoine Jacquier
Imperial College London
Title: Perturbation Analysis of Sub/Super Hedging Problems

Abstract: We investigate the links between various no-arbitrage conditions and the existence of pricing functionals in general markets, and prove the Fundamental Theorem of Asset Pricing therein. When the market consists only of European Call options, we refine the analysis by weakening the no-arbitrage conditions, and in particular, in the case of finitely many traded options, by showing how to complete the market according to precise implied volatility extrapolation. We finally perform a rigorous perturbation analysis of the infinite-dimensional (primal and dual) optimisation problems, and highlight, with numerical evidence, the influence of smile extrapolation on the bounds of exotic options.

Date: Monday, November 6, 2017
Time: 4:30 pm
Location: Wean Hall 8220
Submitted by:  Johannes Muhle-Karbe