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2006-07 Regents Lecture
by Dr. Bruno Dupire, Bloomberg and NYU.

University of California, Santa Barbara
Driving directions and map

Hosted by
Department of Statistics & Applied Probability, UCSB
Center for Research in Financial Mathematics and Statistics

Photo of Dr. Bruno Dupire


Applications of the Root Solution of the Skorohod Embedding Problem in Finance

Wednesday, April 25, 3:15 pm(Refreshments served at 3 pm). South Hall 5607F, UCSB.

The Skorokhod embedding problem amounts to stopping a Brownian motion to hit a target density; it has interesting implications for finance:
a) any solution leads to a model that is calibrated to the option prices of a given maturity and
b) it provides a rule to sell a (martingale) asset in order to achieve a prescribed wealth distribution. We concentrate on the Root Solution (hitting time of a barrier), which provides a canonical mapping of a density into a stopping region. We examine
1) the implications in terms of options on realized variance
2) new Monte Carlo schemes which confine the increments in both space and time at each time step

An Idiot's Guide to Option Pricing: 2006-07 Regents Lecture.

Thursday, April 26, 4:00PM, Corwin pavilion, UCSB.

Abstract: Option pricing puzzles the intuition; for instance the fair price of an option that pays when the market goes up does not depend on the probability the market goes up! We present and illustrate the main principles of option pricing, such as uncertainty modeling, arbitrage, completeness, risk neutrality, hedging, dominance, forward quantities, numerical methods,.... We make liberal use of toy examples to illustrate main concepts and paradoxes.


About Dr. Bruno Dupire

Another photo of Dr. Bruno Dupire

Dr. Bruno Dupire is best known for his work on volatility modeling. He pioneered the "local volatility" models (1993) and subsequently the "stochastic volatility" models widely used to fit option prices. His recent work includes pricing and hedging of volatility derivatives and optimal delta hedging strategies. Dr. Dupire has headed the Derivatives Research teams at Societe Generale, Paribas Capital Market and Nikko Financial Products. He joined the Quantitative Research group at Bloomberg in New York in January 2004 to develop arbitrage strategies, derivatives models, and numerical methods. He is a Fellow and Adjunct Professor at NYU. Dr. Dupire was inducted in the Risk Magazine "Hall of Fame" (2002) as one of the 50 most influential people in Derivatives. He is the most contributing practitioner over the last 5 years in the industry survey of ICBI Global Derivatives, and he is the 2006 winner of the Wilmott Award for Contribution to Quantitative Finance (Cutting Edge Research).


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Department of Statistics and Applied Probability
University of California
Santa Barbara, California 93106-3110