RT Generic
T1 Golden options in financial mathematics
A1 Balbás, Alejandro
A1 Balbás, Beatriz
A1 Balbás, Raquel
A2 Universidad Carlos III de Madrid. Instituto para el Desarrollo de Empresas y Mercados (INDEM), 
AB This paper deals with the construction of  smooth good deals (SGD), i.e., sequences of self- nancing strategies whose global risk diverges to ∞ and such that every security in every strategy of the sequence is a  smooth derivative with a bounded delta. If the selected risk measure is the value at risk then these sequences exist under quite weak conditions, since one can involve risks with both bounded and unbounded expectation, as well as non-friction-free pricing rules. Moreover, every strategy in the sequence is composed of an European option plus a position in a riskless asset. The strike of the option is easily computed in practice, and the ideas may also apply in some actuarial problems such as the selection of an optimal reinsurance contract. If the chosen risk measure is a coherent one then the general setting is more limited. Indeed, though frictions are still accepted, expectations and variances must remain  nite. The existence of SGDs will be characterized, and computational issues will be properly addressed as well. It will be shown that SGDs often exist, and for the conditional value at risk they are composed of the riskless asset plus easily replicable European puts. Numerical experiments will be presented in all of the studied cases.
SN 1989-8843
YR 2018
FD 2018-11
LK https://hdl.handle.net/10016/27672
UL https://hdl.handle.net/10016/27672
LA eng
NO This research was partially supported by the University Carlos III of Madrid (Project 2009/00445/002) and the Spanish Royal Academy of Sciences. The usual caveat applies.
DS e-Archivo
RD 17 jul. 2024