How to Model Repricable-Rate, Non-maturity Products in a Bank: Theoretical and Practical Replicating Portfolio

2013 ◽  
pp. 269-278
Author(s):  
Pascal Damel ◽  
Nadège Ribau-Peltre
Keyword(s):  
Replicating Portfolio

scholarly journals Reverse Bonus Certificate Design and Valuation Using Pricing by Duplication Methods

2015 ◽  
Vol 62 (3) ◽  
pp. 277-289
Author(s):  
Martina Bobriková ◽  
Monika Harčariková
Keyword(s):  
Option Pricing ◽  
Exotic Options ◽  
Pricing Models ◽  
Underlying Asset ◽  
Replication Method ◽  
Maturity Date ◽  
Derivative Market ◽  
Replicating Portfolio ◽  
Pricing Formula

Abstract In this paper we perform an analysis of a capped reverse bonus certificate, the value of which is derived from the value of an underlying asset. A pricing formula for the portfolio replication method is applied to price the capped reverse bonus certificate. A replicating portfolio has profit that is identical to profit from a combination of positions in spot and derivative market, i.e. vanilla and exotic options. Based upon the theoretical option pricing models, the replicating portfolio for capped reverse bonus certificate on the Euro Stoxx 50 index is engineered. We design the capped reverse bonus certificate with various parameters and calculate the issue prices in the primary market. The profitability for the potential investor at the maturity date is provided. The relation between the profit change of the investor and parameters’ change is detected. The best capped reverse bonus certificate for every estimated development of the index is identified.

scholarly journals Mathematical foundation of the replicating portfolio approach

2017 ◽  
Vol 2018 (6) ◽  
pp. 481-504 ◽  
Author(s):  
Jan Natolski ◽  
Ralf Werner
Keyword(s):  
Mathematical Foundation ◽  
Portfolio Approach ◽  
Replicating Portfolio

Markov Dilation of Diffusion Type Processes and its Application to the Financial Mathematics

1999 ◽  
Vol 6 (4) ◽  
pp. 363-378
Author(s):  
R. Tevzadze
Keyword(s):  
Differential Equations ◽  
Integral Representation ◽  
Stochastic Differential Equations ◽  
Markov Processes ◽  
Contingent Claim ◽  
Financial Mathematics ◽  
Diffusion Type ◽  
Replicating Portfolio ◽  
Infinitesimal Operators

Abstract The Markov dilation of diffusion type processes is defined. Infinitesimal operators and stochastic differential equations for the obtained Markov processes are described. Some applications to the integral representation for functionals of diffusion type processes and to the construction of a replicating portfolio for a non-terminal contingent claim are considered.

scholarly journals The difference between LSMC and replicating portfolio in insurance liability modeling

2016 ◽  
Vol 6 (2) ◽  
pp. 441-494 ◽  
Author(s):  
Antoon Pelsser ◽  
Janina Schweizer
Keyword(s):  
The Difference ◽  
Replicating Portfolio

On the steady state of the replicating portfolio: accounting for a growth rate

OR Spectrum ◽  
2003 ◽  
Vol 25 (3) ◽  
pp. 329-343 ◽  
Author(s):  
Jacco L. Wielhouwer
Keyword(s):  
Growth Rate ◽  
Steady State ◽  
Replicating Portfolio

A NOTE ON THE SELF-FINANCING CONDITION FOR FUNDING, COLLATERAL AND DISCOUNTING

2015 ◽  
Vol 18 (02) ◽  
pp. 1550011 ◽  
Author(s):  
DAMIANO BRIGO ◽  
CRISTIN BUESCU ◽  
ANDREA PALLAVICINI ◽  
QING LIU
Keyword(s):  
The Self ◽  
Derivative Pricing ◽  
Replicating Portfolio ◽  
Pricing Framework

We present the derivation of the self-financing condition used in a derivative pricing framework with funding, collateral and discounting. This is done in a way that clarifies the structure of the relevant funding accounts. This clarification is achieved by properly distinguishing between price processes, dividend processes and gains processes. Without this explicit distinction, the resulting self-financing condition can be erroneous, as we illustrate in the case of two papers: Piterbarg (2010) and Burgard & Kjaer (2011a). In these papers, the self-financing condition is equivalent to assuming that a subportfolio is self-financing on its own and without including the cash position. We show that the final result in Piterbarg (2010) is correct, even if the related self-financing condition is not. In the process, we raise a further question on the supplementary source of randomness in the funding rate dynamics that has no hedging counterpart in the replicating portfolio.

How to mine gold without digging

2019 ◽  
Vol 06 (01) ◽  
pp. 1950009
Author(s):  
Kevin Guo ◽  
Tim Leung ◽  
Brian Ward
Keyword(s):  
Optimal Control ◽  
Kalman Filter ◽  
Real Options ◽  
Factor Loadings ◽  
Proposed Model ◽  
Two Factors ◽  
Replicating Portfolio

This paper examines the main drivers of the returns of gold miner stocks and ETFs during 2006–2017. We solve a combined optimal control and stopping problem to demonstrate that gold miner equities behave like real options on gold. Inspired by our proposed model, we construct a method to dynamically replicate gold miner stocks using two factors: the spot gold ETF and market equity portfolio. Furthermore, through each firm’s factor loadings on the replicating portfolio, we dynamically infer the firm’s implied leverage parameters of our model using the Kalman Filter. We find that our approach can explain a significant portion of the drivers of firm implied gold leverage. We posit that gold miner companies hold additional real options which help mitigate firm downside volatility, but these real options contribute to lower returns relative to the replicating portfolio when gold returns are positive.

Sign in / Sign up

Export Citation Format

Share Document