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Cost-efficiency in multivariate Lévy models

100%

Rüschendorf L., Wolf V.

Dependence Modeling

2015

tom 3

nr 1

In this paper we determine lowest cost strategies for given payoff distributions called cost-efficient strategies in multivariate exponential Lévy models where the pricing is based on the multivariate Esscher martingale measure. This multivariate framework allows to deal with dependent price processes as arising in typical applications. Dependence of the components of the Lévy Process implies an influence even on the pricing of efficient versions of univariate payoffs.We state various relevant existence and uniqueness results for the Esscher parameter and determine cost efficient strategies in particular in the case of price processes driven by multivariate NIG- and VG-processes. From a monotonicity characterization of efficient payoffs we obtain that basket options are generally inefficient in Lévy markets when pricing is based on the Esscher measure.We determine efficient versions of the basket options in real market data and show that the proposed cost efficient strategies are also feasible from a numerical viewpoint. As a result we find that a considerable efficiency loss may arise when using the inefficient payoffs.

Weighted entropies

84%

Ebanks B.

Open Mathematics

2010

tom 8

nr 3

602-615

We present an axiomatic characterization of entropies with properties of branching, continuity, and weighted additivity. We deliberately do not assume that the entropies are symmetric. The resulting entropies are generalizations of the entropies of degree α, including the Shannon entropy as the case α = 1. Such “weighted” entropies have potential applications to the “utility of gambling” problem.

Ograniczanie wyników

1 Dependence Modeling

1 Open Mathematics

1 Ebanks B.

1 Rüschendorf L.

1 Wolf V.

1 2015

1 2010

Wyniki wyszukiwania

Cost-efficiency in multivariate Lévy models

Weighted entropies