Seminar Details

Seminar Details


Jan 18

1:30 pm

Pricing Options in Incomplete Markets: Regression with Constraints

Stanislav Uryasev


University of Florida

Joint Computational Finance and Optimization Seminar

We consider a new approach to pricing options in incomplete markets. The algorithm replicates an option by a portfolio consisting of a stock and a bond. It simultaneously calculates prices of options with all strikes. We apply a linear regression framework with constraints which can accommodate various assumptions on stochastic processes of the underlying security. We can directly calibrate the model with historical prices of the underlying security using assumptions on the class of replication policies.

* Stan Uryasev is a professor at the University of Florida and Director of the Risk Management and Financial Engineering Lab. His research is focused on the development of efficient computer modeling and optimization techniques and their applications in finance and military projects, including: (1) Risk management, (2) Portfolio optimization, (3) Asset and liability modeling, (4) Classification in financial applications, and (5) Optimal trading strategies. He has published three books (one monograph and two edited volumes) and about seventy research papers.