Seminar on Probability and Statistics

Seminar information archive ~03/29Next seminarFuture seminars 03/30~

Organizer(s) Nakahiro Yoshida, Teppei Ogihara, Yuta Koike


13:00-14:10   Room #006 (Graduate School of Math. Sci. Bldg.)
Ernst August Frhr. v. Hammerstein (Albert-Ludwigs-Universität Freiburg)
Laplace and Fourier based valuation methods in exponential Levy models (JAPANESE)
[ Abstract ]
A fundamental problem in mathematical finance is the explicit computation of expectations which arise as prices of derivatives. Closed formulas that can easily be evaluated are typically only available in models driven by a Brownian motion. If one considers more sophisticated jump-type Levy processes as drivers, the problem quickly becomes rather nontrivial and complicated. Starting with the paper of Carr and Madan (1999) and the PhD thesis of Raible (2000), Laplace and Fourier based methods have been used to derive option pricing formulas that can be evaluated very efficiently numerically. In this talk we review the initial idea of Raible (2000), show how it can be generalized and discuss under which precise mathematical assumptions the Laplace and Fourier approach work. We then give several examples of specific options and Levy models to which the general framework can be applied to. In the last part, we present some formulas for pricing options on the supremum and infimum of the asset price process that use the Wiener-Hopf factorization.

FMSP Lectures
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