Pricing and Hedging Strategies for Contingent Claims in an Incomplete Hybrid Emissions Market
Speaker:
Walid Mnif
Date and Time:
Friday, April 9, 2010 - 2:20pm to 2:40pm
Location:
Fields Institute, Room 230
Abstract:
We propose a stochastic approach for trading and pricing emission permits under an incomplete hybrid system in which credits are partially fungible from one period to another. Our approach is based on the filtering theory proposed by Follmer and Schweizer (1991). Under our framework exotic options can easily be priced with the use of straightforward derivatives pricing algorithms such as Monte Carlo simulation.