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CATEGORIES:Probability
SUMMARY:Optimal Skorokhod embeddings with applications to
pricing and hedging of double barrier options - Ja
n Obloj (Imperial)
DTSTART;TZID=Europe/London:20080129T140000
DTEND;TZID=Europe/London:20080129T150000
UID:TALK10298AThttp://talks.cam.ac.uk
URL:http://talks.cam.ac.uk/talk/index/10298
DESCRIPTION:Let B be a Brownian motion and let S and I be its
running maximum and minimum processes respectively
. Fix a distribution m and positive and negative t
hresholds U and L. We consider the problem of maxi
mising the probability that S(T) exceeds U and I(T
) is less than L\, over all stopping times T such
that B(T) has distribution m and such that the pro
cess B stopped at T is UI. We describe explicitly
both the bound and the stopping time which achieve
s it. We do the same for the minimisation problem.
This implies model-free bounds on prices of certa
in financial derivatives (double barrier one-touch
options). Furthermore\, similarly to Brown\, Hobs
on and Rogers (2001)\, in deriving our bounds we c
onstruct pathwise inequalities which induce model-
free super-hedging (or sub-hedging) strategies for
those financial derivatives.
LOCATION:MR12\, CMS\, Wilberforce Road\, Cambridge\, CB3 0W
B
CONTACT:Norros I.
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