We discuss pathwise pricing-hedging dualities in continuous time and on a frictionless market consisting of finitely many risky assets with continuous price trajectories.

In this paper, we consider the pricing and hedging of a financial derivative for an insider trader, in a model-independent setting. In particular, we suppose that the insider wants to act in a way which is independent of any modelling assumptions, but that she observes market information in the form of the prices of vanilla call options on the asset. We also assume that both the insider’s information, which takes the form of a set of impossible paths, and the payoff of the derivative are time-invariant. This setup allows us to adapt recent work of Beiglboeck, Cox, and Huesmann [BCH16] to prove duality results and a monotonicity principle, which enables us to determine geometric properties of the optimal models. Moreover, we show that this setup is powerful, in that we are able to find analytic and numerical solutions to certain pricing and hedging problems. (Joint with B. Acciaio and M. Huesmann)

Rita Maria del Rio Chanona:

Global financial contagion on a Multiplex Network

We explore the global financial system, in particular the risk of global financial contagion through network theory. Although there is extensive literature on contagion in networks, we argue that it is important to consider different channels of contagion. Therefore we deem into the multilayer framework, where nodes are countries and each layer represents a different type of financial obligation. The multiplex network is built using data provided by collaborators in the IMF. We study contagion with a percolation model and conclude that financial shocks can be amplified considerably when the multilayer structure is taken into account.


Johannes Wiesel:

Robust Superhedging vs Robust Statistics

In this talk I try to reconcile the different understanding of robustness in mathematical finance and statistics. Motivated by recent advances in the estimation of risk measures, I present estimators for the superhedging price of a claim given a history of observed prices. I discuss weak efficiency and convergence speed of these estimators. Besides I explain how to apply classical notions of sensitivity for the estimation procedure. This talk is based on ongoing work with Jan Obloj.

 

Christoph Siebenbrunner:

Clearing Algorithms and Network Centrality

I show that the solution of a standard clearing model commonly used in contagion analyses for financial systems can be expressed as a specific form of a generalized Katz centrality measure under conditions that correspond to a system-wide shock. This result provides a formal explanation for earlier empirical results which showed that Katz-type centrality measures are closely related to contagiousness. It also allows assessing the assumptions that one is making when using such centrality measures as systemic risk indicators. I conclude that these assumptions should be considered too strong and that, from a theoretical perspective, clearing models should be given preference over centrality measures in systemic risk analyses.


Andreas Sojmark:

An SPDE Model for Systemic Risk with Default Contagion

In this talk, I will present a structural model for systemic risk, phrased as an interacting particle system for $N$ financial institutions, where each institution is removed upon default and this has a contagious effect on the rest of the system. Moreover, the financial instituions display herding behavior and they are exposed to correlated noise, which turns out to be an important driver of the contagion mechanism. Ultimately, the motivation is to provide a clearer connection between the insights from dynamic mean field models and the detailed study of contagion in the (mostly static) network-based literature. Mathematically, we prove a propagation of chaos type result for the large population limit, where the limiting object is characterized as the unique solution to a nonlinear SPDE on the positive half-line with Dirichlet boundary. This is based on joint work with Ben Hambly and I will also point out some interesting future directions, which are part of ongoing work with Sean Ledger.

In this talk, I consider the problem of pricing and (statically)
hedging short-term contingent claims written on illiquid or
non-tradable assets.
In a first part, I show how to find the best European payoff written
on a given set of underlying assets for hedging (under several
metrics) a given European payoff written on another set of underlying
assets -- some of them being illiquid or non-tradable. In particular,
I present new results in the case of the Expected Shortfall risk
measure. I also address the associated pricing problem by using
indifference pricing and its link with entropy.
In a second part, I consider the more classic case of hedging with a
finite set of simple payoffs/instruments and I address the associated
pricing problem. In particular, I show how entropic methods (Davis
pricing and indifference pricing à la Rouge-El Karoui) can be used in
conjunction with recent results of extreme value theory (in dimension
higher than 1) for pricing and hedging short-term out-of-the-money
options such as those involved in the definition of Daily Cliquet
Crash Puts.

In this talk, I consider  the problem of
hedging European and Bermudan option with a given probability. This 
question is
more generally linked to portfolio optimisation problems under weak
stochastic target constraints.
I will recall, in a Markovian framework, the characterisation of the 
solution by
non-linear PDEs. I will then discuss various numerical algorithms
to compute in practice the quantile hedging price.

This presentation is based on joint works with B. Bouchard (Université 
Paris Dauphine), G. Bouveret (University of Oxford) and ongoing work 
with C. Benezet (Université Paris Diderot).