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Minimization of Conditional Value at Risk for Spread Options under Capital Constraints
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- Author / Creator
- Maksimov, Chingis
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The thesis deals with the problem of minimization of Conditional Value at Risk within the context of Margrabe market under constraints on the initial capital available. We propose to approximate the distribution of the difference between two lognormal random variables using normal distribution and derive a closed-form pricing formula for spread options. We use this idea along with the existing spread option pricing formulas to develop a new methodology for determining Conditional Value at Risk-efficient portfolios. We conclude that the approaches considered provide comparable results given that the parameters of the market are of particular form. Theoretical results are supported by numerical examples based on real financial data.
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- Subjects / Keywords
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- Graduation date
- Fall 2018
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- Type of Item
- Thesis
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- Degree
- Master of Science
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- License
- Permission is hereby granted to the University of Alberta Libraries to reproduce single copies of this thesis and to lend or sell such copies for private, scholarly or scientific research purposes only. Where the thesis is converted to, or otherwise made available in digital form, the University of Alberta will advise potential users of the thesis of these terms. The author reserves all other publication and other rights in association with the copyright in the thesis and, except as herein before provided, neither the thesis nor any substantial portion thereof may be printed or otherwise reproduced in any material form whatsoever without the author's prior written permission.