27 Marzo, 2014 14:00 in punto

Sezione di Finanza Quantitativa

Spread option valuation in Ornstein-Uhlenbeck stochastic volatility models driven by matrix subordinators

Martin Glanzer, Technical University of Graz

Aula Seminari III piano

Stochastic volatility models driven by subordinators, i.e. Lévy processes with positive jumps, gained some popularity in modeling equity markets and, more recently, in foreign exchange and commodity markets. A suitable formulation of these models in a multidimensional setting requires a matrix subordination approach. Some basic ideas of matrix subordinators and their fundamental properties will be provided in this talk together with some applications to 'Spread Options' valuation for a specific model belonging to this class. Some analytical and numerical issues will be addressed in dealing with the valuation problem for these kind of options in the matrix subordinator driven OU stochastic volatility models.