Event
01_1
| 제출번호(No.) | 0105 |
|---|---|
| 분류(Section) | Special Session |
| 분과(Session) | CMAC (SS-01) |
| 영문제목 (Title(Eng.)) |
Curse of dimensionality in pricing multi-asset options |
| 저자(Author(s)) |
Huh Jeonggyu1, Jeon Jaegi1, Kim Jeong-Hoon1, Park Hyejin2 Yonsei University1, Hanyang University2 |
| 초록본문(Abstract) | The number of tailor-made hybrid structured products has risen more prominently to fit each investor’s preferences and requirements as they become more diversified. The structured products entail synthetic derivatives such as combinations of bonds and/or stocks conditional on backing by underlying securities, stochastic volatility, stochastic interest rates or exchanges rates. The complexity of these multi-asset structures yields lots of difficulties of pricing the products. Because of the complexity, Monte-Carlo simulation is a possible choice to price them but it may not produce stable Greeks leading to a trouble in hedging against risks. In this light, it is desirable to use partial differential equations with relevant analytic and numerical techniques. Even if the partial differential equation method would generate stable security prices and Greeks for single asset options, however, it may result in the curse of dimensionality when pricing multi-asset derivatives. In this study, we make the best use of multi-scale nature of stochastic volatility to reduce the curse of dimensionality. Also, we present a transformation formula by which the pricing group parameters required for the multi-asset options in illiquid market can be calculated from the underlying market parameters. |
| 분류기호 (MSC number(s)) |
91G20, 91G60 |
| 키워드(Keyword(s)) | multi-asset, multi-scale, stochastic volatility, asymptotics, dimension reduction, illiquid market |
| 강연 형태 (Language of Session (Talk)) |
Korean |