Model-independent pricing with additional information: a Skorokhod embedding approach. by Beatrice Acciaio

Event Date: 

Monday, October 17, 2016 -
3:30pm to 5:00pm

Event Date Details: 

Refreshments served at 3:15 p.m

Event Location: 

  • South Hall 5607F

Beatrice Acciaio — LSE, PSTAT-UCSB 

Title: Model-independent pricing with additional information: a Skorokhod embedding approach.

Abstract: I will consider the pricing problem of an agent having additional (potentially insider) information on the market in a model-independent setup. Following Hobson's approach, I will reformulate this problem as a constrained Skorokhod embedding problem, and show a natural supperreplication result. Furthermore, I will show a monotonicity principle for the constrained SEP, giving a geometric characterisation of the support of the optimisers (in the spirit of Beiglboeck, Cox and Huesmann (2014)) which allows to link the additional information with geometric properties of the optimizers to the constrained embedding problem. Surprisingly, for certain types of information the absence of arbitrage can be easily checked by considering only unconstrained solutions. This is a powerful setup in that one can find analytic and numerical solutions to certain pricing and hedging problems. The talk is based on a joint work with Alex Cox and Martin Huesmann.