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Paper / 2024SMQ / 216022488980175
Second-Order Esscher Pricing for Lévy Models with Applications: Risk Management and Fear Quantification
Ella Elazkany / Mich`ele Vanmaele / Tahir Choulli
derivatives / mathematical financeResource overview

Second-Order Esscher Pricing for Lévy Models with Applications: Risk Management and Fear Quantification

Paper2024

by Ella Elazkany, Mich`ele Vanmaele, Tahir Choulli

Tags
derivativesmathematical financeoption pricingrisk managementstochastic processes

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Understand this paper

Suggested foundations for options and derivatives pricing and stochastic processes and pricing. Specialist prerequisites vary by paper.

Before you read

  1. The Binomial Model

    Build replication and risk-neutral probabilities in a tractable model.

  2. Market Model and Risk-Neutral Valuation

    Distinguish pricing probabilities from physical forecasts.

  3. Conditional Expectation

    Understand what it means to condition on current information.

  4. Stochastic Processes, Brownian Motion and Itô's Lemma

    Follow Brownian dynamics and the second-order term in Itô calculus.

Go further

  1. The Black-Scholes PDE, Formula and Implied Volatility

    Connect the pricing equation, closed-form value and implied volatility.

  2. Simulating SDEs

    Translate continuous dynamics into a numerical experiment.

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