Managing Derivative Exposure
AbstractWe present an approach to derivative exposure management based on subjective and implied probabilities. We suggest to maximize the valuation difference subject to risk constraints and propose a class of risk measures derived from the subjective distribution. We illustrate this process with specific examples for the two and three dimensional case. In these cases the optimization can be performed graphically.
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Bibliographic InfoPaper provided by arXiv.org in its series Papers with number 1004.1053.
Date of creation: Apr 2010
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Web page: http://arxiv.org/
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- Ulrich Kirchner, 2009. "Market Implied Probability Distributions and Bayesian Skew Estimation," Papers 0911.0805, arXiv.org.
- Ulrich Kirchner, 2010. "A Subjective and Probabilistic Approach to Derivatives," Papers 1001.1616, arXiv.org.
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