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UID:www.tcs.tifr.res.in/event/443
DTSTAMP:20230914T125924Z
SUMMARY:Connecting Derivative Prices Written on the Same Underlying
DESCRIPTION:Speaker: Matthew Lorig (Princeton University\nORFE Department\n
 Room 116\, Sherrerd Hall\nPrinceton\, NJ 08544\nUnited States of America)\
 n\nAbstract: \nAbstract: Often\, different financial derivatives are subje
 ct to the same sources of risk.  In such cases\, the prices of these deri
 vatives ought to be related.  In this talk\, we will explore the relation
 ship between a variance swap\, which is a financial derivative whose payof
 f depends on the entire path of a stock $S$ over a fixed time interval $[0
 \,T]$\, and a European contract\, which is a financial derivative whose pa
 yoff depends only on the value of $S$ at the terminal time $T$.  We will 
 prove that\, when a stock is modeled as a time-changed Markov process\, th
 e variance swap has the same value as a European contract whose payoff fun
 ction is the solution of an integro-differential equation (which we will s
 olve).  The significance of this result is that the path-dependent varian
 ce swap contract can be priced relative to liquidly traded (and efficientl
 y priced) path-independent European options in a semi-nonparametric fashio
 n.\n
URL:https://www.tcs.tifr.res.in/web/events/443
DTSTART;TZID=Asia/Kolkata:20140114T113000
DTEND;TZID=Asia/Kolkata:20140114T123000
LOCATION:AG-80
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