Robust Static Super-Replication of Barrier Options

Jan H. Maruhn

ISBN 10: 3110204681 / ISBN 13: 9783110204681

Editore: De Gruyter, DE, 2009

Riguardo questo articolo

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.

Codice articolo LU-9783110204681

Dati bibliografici

• Titolo: Robust Static Super-Replication of Barrier Options
• Editore: De Gruyter, DE
• Data di pubblicazione: 2009
• Lingua: Inglese
• ISBN 10: 3110204681
• ISBN 13: 9783110204681
• Rilegatura: Hardback
• Edizione: 1st.
• Condizione: New
• Dimensioni: 7 L x 0,5 A x 10 P (pollici) 7 pollici di larghezza per 0,5 pollici di altezza per 10 pollici di profondità
• Peso: 543 grammi

Descrizione articolo

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.

Informazioni sull?autore

Jan H. Maruhn, UniCredit Markets & Investment Banking, Munich, Germany.