1-4 September 2015
Angers - France
Europe/Paris timezone

Sensitivity Analysis in Lévy Fixed Income Theory

2 Sep 2015, 10:50
40m
Angers - France

Angers - France

Speaker

Prof. Ernst Eberlein (University of Freiburg)

Description

A brief introduction into the Lévy Libor and the Lévy forward process model is given. Basic properties of these two frameworks are discussed. The main goal is to derive formulas for price sensitivities of standard fixed income derivatives. Two approaches are discussed. The first approach is based on the integration–by–parts formula, which lies at the core of the application of the Malliavin calculus to finance. The second approach consists in using Fourier based methods for pricing derivatives. We illustrate the result by applying the formulas to a caplet price where the underlying model is driven by a time–inhomogeneous Gamma process and alternatively by a Variance Gamma process. A comparison between the two approaches which come from totally different mathematical fields is made. This is joint work with M'hamed Eddahbi and Sidi Mohamed Lalaoui

Primary author

Prof. Ernst Eberlein (University of Freiburg)

Presentation Materials

There are no materials yet.