Speaker: Jarek Kędra, Professor, Department of Mathematics, University of Aberdeen, Scotland, UK

Title: Pricing and hedging multi-asset options in an extended binomial incomplete market model.

Abstract: : In our previous work with Libman and Steblovskaya, we consider a multi-asset financial market that follows a multi-dimensional binomial model. In this market, we consider multi-asset contingent claims (European basket options). We obtain explicit formulas for the upper and lower bounds of an interval of no-arbitrage option prices by solving an appropriate linear programming problem. We also describe minimum-cost super-hedging non-self-financing strategies by solving a dual linear programming problem.

In this talk, I will report on the extension of our results to the case of a more realistic market model, the Extended Multi-Dimensional Market Model, where the underlying stock price ratios are distributed in a closed interval rather than taking two values.

This event is part of the Mathematical Sciences Research Seminar Series.