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SUMMARY:On a Heath-Jarrow-Morton approach for stock options - Jan Kallsen\
 , University of Kiel
DTSTART:20100511T153000Z
DTEND:20100511T173000Z
UID:TALK24224@talks.cam.ac.uk
CONTACT:Berestycki
DESCRIPTION:In the Heath-Jarrow-Morton (HJM) approach in interest rate the
 ory the whole forward rate curve rather than the short rate is considered 
 as state variable for a stochastic model. Absence of arbitrage then leads 
 to consistency and drift restrictions\, in particular the HJM drift condit
 ion. Several attempts have been made to transfer this idea to options on a
  stock\, cf. e.g. by Schönbucher (1999)\, Schweizer & Wissel (2008)\, Car
 mona & Nadtochiy (2009)\, Jacod & Protter (2006). Here\, the underlying st
 ock plays the role of the short rate. The implied volatility surface or a 
 reparametrisation serves as state variable and hence as counterpart of the
  forward rate curve in the classical framework of HJM. Our approach to thi
 s problem resembles Carmona & Nadtochiy (2009) in that we try to preserve 
 main features of the HJM setup. However\, it is based on a different param
 etrisation or codebook\, which allows to simplify both theory and applicat
 ion. \n\nhttp://www.numerik.uni-kiel.de/~jk/personen/kallsen.html
LOCATION:MR12\, CMS\, Wilberforce Road\, Cambridge\, CB3 0WB
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