BEGIN:VCALENDAR
VERSION:2.0
PRODID:-//talks.cam.ac.uk//v3//EN
BEGIN:VTIMEZONE
TZID:Europe/London
BEGIN:DAYLIGHT
TZOFFSETFROM:+0000
TZOFFSETTO:+0100
TZNAME:BST
DTSTART:19700329T010000
RRULE:FREQ=YEARLY;BYMONTH=3;BYDAY=-1SU
END:DAYLIGHT
BEGIN:STANDARD
TZOFFSETFROM:+0100
TZOFFSETTO:+0000
TZNAME:GMT
DTSTART:19701025T020000
RRULE:FREQ=YEARLY;BYMONTH=10;BYDAY=-1SU
END:STANDARD
END:VTIMEZONE
BEGIN:VEVENT
CATEGORIES:Cambridge Analysts' Knowledge Exchange
SUMMARY:Continuously-generated jump processes - Ben Derret
t (Statslab)
DTSTART;TZID=Europe/London:20140528T153000
DTEND;TZID=Europe/London:20140528T160000
UID:TALK52539AThttp://talks.cam.ac.uk
URL:http://talks.cam.ac.uk/talk/index/52539
DESCRIPTION:We construct a flexible and numerically tractable
class of asset models by firstly choosing a bivari
ate diffusion process $(U\,Y)$\, and then defining
the price of the asset at time $t$ to be the valu
e of $Y$ when $U$ first exceeds $t$. Such price pr
ocesses will typically have jumps\; conventional p
ricing methodologies would try to solve a PIDE\, w
hich can be numerically problematic\, but using th
e fact that the pricing problem is embedded in a t
wo-dimensional diffusion\, we are able to exploit
efficient methods for two-dimensional diffusion eq
uations to find prices. Models with time dependenc
e (that is\, where the bivariate diffusion is $U$-
dependent) are no more difficult in this approach.
\n\nPricing a European option for a model in this
class consists of solving a linear second order el
liptic PDE. Models in this class range from the mo
st parsimonious\, with few parameters\, to those w
hich can match the observed term structure of impl
ied volatility. This allows flexibility. We constr
uct an example model which accounts for so-called
volatility events\, caused by the scheduled releas
e of pertinent information\, such as unemployment
figures\, inflation rates and economic growth rate
s.
LOCATION:MR14\, Centre for Mathematical Sciences
CONTACT:Vittoria Silvestri
END:VEVENT
END:VCALENDAR