SMS scnews item created by Holger Dullin at Fri 14 Aug 2009 1014
Type: Seminar
Distribution: World
Expiry: 20 Aug 2009
Calendar1: 19 Aug 2009 1400-1500
CalLoc1: Eastern Avenue Lecture Theatre
Auth: dullin@cpe-60-229-47-176.nsw.bigpond.net.au

Applied Maths Seminar: Ken Siu -- A PDE Approach for Risk Measures for Derivatives With Regime Switching

Ken Siu Faculty of Business and Economics, Macquarie University 

A PDE Approach for Risk Measures for Derivatives With Regime Switching 

Wednesday 19th August 14:05-14:55pm, Eastern Avenue Lecture Theatre.  

In this talk, we shall discuss a partial differential equation (P.D.E.)  approach to
evaluate coherent risk measures for derivative securities in a Markovian
regime-switching Black-Scholes-Merton environment.  In such a paradigm, the dynamics of
underlying risky asset are governed by a Markovian regime-switching Geometric Brownian
Motion; that is, the appreciation rate and the volatility in the log-normal dynamics of
the underlying risky asset switch over time according to the state of a continuous-time,
finite-state, Markov chain.  The states of the chain are interpreted as different states
of an economy.  The P.D.E.  approach provides market practitioners with a flexible and
effective way to evaluate risk measures in the Markovian regime-switching
Black-Scholes-Merton model.  We shall demonstrate the use of the P.D.E.  approach for
evaluating risk measures for complex options, such as American options and barrier
options.  

Joint work with Robert J.  Elliott and Leunglung Chan.


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