Seminar in Financial Mathematics & Probability

Alan J. King IBM Research Division Thomas J. Watson Research Center Duality and Martingales: A mathematical programming perspective on contingent claims Tuesday, February 20, 2001 3:15pm Pierce 116

Abstract:   The hedging of contingent claims in the discrete time, discrete state case is analyzed from the perspective of the problem of managing the claim as a liability of the writer. Application of conjugate duality leads to the classical theorems of financial mathematics, namely the equivalence of absence of arbitrage and the existence of an equivalent martingale probability measure on security price filtrations. The duality approach easily extends to the analysis of pricing measures when modeling risk management concerns, existing structural liabilities, and the impact of spreads and margin requirements for writers of contingent claims.

Coffee and refreshments will be available starting at 3:00pm. For additional information contact Khaldoun Khashanah  or Darinka Dentcheva.