Imperial College London
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ProfessorThomasCass

Faculty of Natural Sciences, Department of Mathematics

Professor of Mathematics
 
 
 
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Contact

 

thomas.cass

 
 
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Location

 

808Weeks BuildingSouth Kensington Campus

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Summary

 

Publications

Citation

BibTex format

@article{Armstrong:2021:10.1111/mafi.12308,
author = {Armstrong, J and Bellani, C and Brigo, D and Cass, T},
doi = {10.1111/mafi.12308},
journal = {Mathematical Finance},
title = {Option pricing models without probability: a rough paths approach},
url = {http://dx.doi.org/10.1111/mafi.12308},
year = {2021}
}
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RIS format (EndNote, RefMan)

TY  - JOUR
AB  - We describe the pricing and hedging of financial options without the use of probability using rough paths. By encoding the volatility of assets in an enhancement of the price trajectory, we give a pathwise presentation of the replication of European options. The continuity properties of roughpaths allow us to generalize the socalled fundamental theorem of derivative trading, showing that a small misspecification of the model will yield only a small excess profit or loss of the replication strategy. Our hedging strategy is an enhanced version of classical delta hedging where we use volatility swaps to hedge the secondorder terms arising in roughpath integrals, resulting in improved robustness.
AU  - Armstrong,J
AU  - Bellani,C
AU  - Brigo,D
AU  - Cass,T
DO  - 10.1111/mafi.12308
PY  - 2021///
SN  - 0960-1627
TI  - Option pricing models without probability: a rough paths approach
T2  - Mathematical Finance
UR  - http://dx.doi.org/10.1111/mafi.12308
UR  - http://hdl.handle.net/10044/1/88634
ER  -
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