Financial Engineering Seminar Series

Adding Optionality

Stevens Institute of Technology

Einstein’s velocity addition formula keeps the “sum” of two velocities inside [-c,c], where c is the speed of light. Similarly, a $1 bet that a security will be priced below a threshold must have a value inside [-1,1] . We explore the consequences of reducing derivative security valuation to a generalized sum. We find in particular that the value of repeated optionality is just repeated generalized summation. As a result, we can value particular kinds of Bermudan options in closed form and hedge them with vanilla.

August 27, 2020

5:00 PM – 6:00 PM
Online Zoom discussion
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Presenter: Peter Carr

Peter CarrDr. Peter Carr has been chair of the finance and risk engineering department at NYU Tandon School of Engineering for the last four years. He also presently serves as a trustee for the National Museum of Mathematics and WorldQuant University. Previously, he had a 20-year career heading quant groups in finance. Prior to joining the financial industry, Dr. Carr was a finance professor at Cornell University, after obtaining his Ph.D. from UCLA in 1989. He has more than 90 publications in academic and industry-oriented journals and serves as an associate editor for eight journals related to mathematical finance. He was selected as Quant of the Year by Risk Magazine in 2003 and Financial Engineer of the Year by IAQF/Sungard in 2010.

About this series

The Financial Engineering Seminar Series is a recurring event featuring thought leaders from industry and academia, who bring their experiences to a variety of important topics in this discipline. For more on financial engineering at Stevens, visit the master’s program homepage.

One thought on “Financial Engineering Seminar Series”

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