Derivatives Pricing Under Uncertainty

Radu Tunaru

Chapter 5 in Model Risk in Financial Markets:From Financial Engineering to Risk Management, 2015, pp 65-114 from World Scientific Publishing Co. Pte. Ltd.

Abstract: The following sections are included:Introduction to Model RiskParameter estimation riskModel selection riskModel identification riskComputational implementation riskModel protocol riskUncertain VolatilityAn option pricing model with uncertain volatilityOption Pricing under Uncertainty in Complete MarketsParameter uncertaintyModel uncertaintyNumerical examplesAccounting for parameter estimation risk in the Black-Scholes modelAccounting for parameter estimation risk in the CEV modelA Simple Measure of Parameter Uncertainty RiskBayesian Option PricingModelling the future asset value under physical measureModelling the current asset value under a risk neutral measureMeasuring Model UncertaintyWorst case risk measureCont's Framework for Model UncertaintyAn axiomatic approachA coherent measure of model riskA convex measure of model riskNotes and Summary

Keywords: Model Risk; Risk Management; Financial Engineering; Financial Markets (search for similar items in EconPapers)
Date: 2015
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