Lévy Driven Models in Mathematical Finance
Speaker: Professor Ernst Eberlein, University of Freiburg, Germany
Abstract: Most of the models implemented in the financial industry are still diffusion based, i.e. they are driven by Brownian motions. A number of empirical studies of financial time series shows however that with the normal distributions underlying these processes only a poor approximation of the real return distributions can be obtained. As a consequence the classical approach produces a significant model risk.
In this talk we survey the development of more powerful models which are driven by Lévy processes or more general by semimartingales. Among the processes considered are hyperbolic, variance gamma as well as normal inverse Gaussian processes. Due to the flexibility of the underlying distributions more accurate results can be obtained in risk management and derivative pricing. Besides of equity models we consider in particular models for fixed income and credit markets. Implementation issues are discussed as well. From the mathematical point of view a basic knowledge of modern stochastic analysis is required.
- 6 November 2005
- City - Broadway
- Conference Delegates