Mathematical Finance & Financial Data Science Seminar

Static Replication of European Standard Dispersion Options as a Radon Transform Inverse Problem

Speaker: S├ębastien Bossu, NYU Courant & Ogee Group LLC

Location: Online

Date: Tuesday, November 10, 2020, 5:30 p.m.

Synopsis:

The replication of any European contingent claim by a static portfolio of calls and puts with strikes forming a continuum, formally proven by Carr and Madan in 1998, extends to "standard dispersion" options written on the Euclidean norm of a vector of n asset performances.  With the help of fractional calculus techniques we derive replicating portfolios for calls, puts and indeed any claim contingent on standard dispersion using vanilla basket calls whose basket weights span an n-dimensional continuum.  Consequently multi-asset standard dispersion options admit a "model-free" price enforced by arbitrage, just as single-asset European claims do. This is joint work with Peter Carr and Andrew Papanicolaou, NYU Tandon,

The first half of this talk will discuss the main results of Sébastien's latest paper in the most accessible way possible, while the second half will develop the advanced mathematical theory and tools employed.

Bio – Sébastien Bossu

Sébastien Bossu is Principal at his startup firm Ogee Group LLC in New York where he runs his small hedge fund focused on macro option strategies, and serves as adjunct professor at NYU Courant.  He has fifteen years’ experience in the financial industry and worked at institutions such as J.P. Morgan, Dresdner Kleinwort and Goldman Sachs. An expert in financial derivatives, Sébastien has published several papers and textbooks in his field and is a regular speaker at international conferences.  He is a graduate from The University of Chicago, HEC Paris, Columbia University and Université Pierre et Marie Curie.

 

Sébastien's popular industry paper "Just What You Need to Know About Variance Swaps" circulated widely and made a significant contribution to the development of volatility investing as an asset class.  As a young Analyst at JPMorgan, he also discovered the  correlation proxy formula and was the first author to establish the connection between dispersion trading and correlation swaps.  Visit sbossu.com for further details and links.

Notes:

Online Zoom access will be provided to registered attendees.

Registration:  This event is free, but requires registration.  Please use this link to register: 

https://forms.gle/7u3YVdgVLk2J7ovX9