Derivatives Replication under Laplace Dynamics
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Date: 01-22-2007
Start Time:
6:00pm
End Time: 7:30pm
Speaker: Peter Carr, Bloomberg
Location: 412 Schapiro CEPSR, Davis Auditorium
ABSTRACT
We examine the simplifications that arise when replicating
derivatives if the dynamics are assumed to be at least locally drawn
from a Laplace distribution. In particular, we show how to replicate
the payoffs to standard options, barrier options, and volatility
derivatives in both discrete and continuous time. In general, the
replicating strategy involves dynamic trading in near dated options.
BIO
Dr. Peter Carr has over ten years of experience in the derivatives industry. For the past 3 years, Dr. Carr has headed Quantitative Financial Research at Bloomberg and the Masters in Mathematical Finance program at NYU’s Courant Institute. Prior to his current positions, he headed equity derivative research groups at 2 major banks and was a finance professor for 8 years at Cornell University. Conducting research in the interface between academia and industry, he has published extensively in both academic and industry-oriented journals. He is currently the treasurer of the Bachelier Finance Society and an associate editor for 8 journals related to mathematical finance. A plenary speaker at many practitioner conferences, he has recently won awards from Wilmott Magazine for Cutting Edge Research and from Risk Magazine for“Quant of the Year”. In ICBI’s 2006 survey of contributions to the derivatives industry, Dr. Carr was ranked as a leading academic and practitioner, the only person to appear in the top 3 in both categories.