Abstract
This paper applies the uncertain nonlinear parameter approach, originally by Avellaneda et al. and Lyons, to model non-local changes in financial variables and the resulting impact on portfolios of derivatives and their underlying assets. It formulates the non-probabilistic uncertainty assumptions as a governing system of nonlinear PDEs about both the spatial and the time dimensions of the variables. The solution technique can be decomposed as a control problem for the former and a free-boundary problem for the latter. It is shown that, modelled in a non-probabilistic way any jump in a variable can be treated in the same manner as a dividend on equity.KeywordsOption PriceFinancial DerivativeDividend AnnouncementVanilla OptionStatic HedgeThese keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.
Sign-in/Register to access full text options 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
