Functional co-monotony of processes with applications to peacocks and barrier options

DOI10.1007/978-3-319-00321-4_15zbMATH Open1291.60066arXiv1209.4262OpenAlexW1828003149MaRDI QIDQ2865115FDOQ2865115

Authors: Gilles Pagès 

Publication date: 28 November 2013

Published in: Lecture Notes in Mathematics (Search for Journal in Brave)

Abstract: We show that several general classes of stochastic processes satisfy a functional co-monotony principle, including processes with independent increments, Brownian diffusions, Liouville processes. As a first application, we recover some recent results about peacock processes obtained by Hirsch et al. which were themselves motivated by a former work of Carr et al. about the sensitivity of Asian Call options with respect to their volatility and residual maturity (seniority). We also derive semi-universal bounds for various barrier options.

Full work available at URL: https://arxiv.org/abs/1209.4262

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zbMATH Keywords

fractional Brownian motionbarrier optionsLiouville processantithetic simulation methodAsian optiosco-monotony

Mathematics Subject Classification ID

Financial applications of other theories (91G80) General theory of stochastic processes (60G07)

Cited In (4)

• Improved one-sided deviation inequalities under regularity assumptions for product measures
• One‐two dependence and probability inequalities between one‐ and two‐sided union‐intersection tests
• The Markov-quantile process attached to a family of marginals
• Comonotonic stochastic processes and generalized mean-square stochastic integral with applications

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