Options on Realized Volatility
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Date: 02-07-2005
Start Time:
6:00pm
End Time: 7:30pm
Speaker: Zhenyu Duanmu, Merrill Lynch
Location: 412 Shapiro CEPSR, Davis Auditorium
ABSTRACT
By identifying a fixed term variance swap as the hedging instrument ( underlying ) for a realized volatility option with the same maturity, we have established a simply Black-Scholes type of pricing/hedging system for this new class of options. We have specified the dynamics of the underlying by taking the full advantage of its unique construction and the observable behavior of the implied volatilities. The specification is simple enough to allow a speedy implementation and at the same time, realistic enough to capture the general characteristics of the underlying. Indeed I believe that the proposed model and its specification is a right candidate for the future bench marking of this new generation of the options.
BIO
Zhenyua Duanmu obtained a Ph.D in Finance under the supervision of Professor Robert Jarrow, at the Johnson Graduate School of Management, Cornell University, Dec in 1993. From 1994 to 1995 he was an Equity Derivative Quant / Vice President at Bear Stearns in the New York office. From 1995 to 1996 he worked as an Equity Derivative Desk Quant / Vice President at UBS in the New York office Since 1996 he has been an Exotic Equity Derivative Trader and Director at Merrill Lynch in the New York office.