In this contribution we provide a consistent pricing setting for mul- tivariate equity derivatives. Consistently with the prescriptions of the Efficient Market Hypothesis and of the martingale pricing approach, we provide a model in which prices are martingale both with respect to their own filtration and to the enlarged multivariate filtration. We show that if the log-prices follow processes with independent increments and each one of them is not Granger caused by the others, the pricing procedure can be performed by simply: i) generating time series of each asset; ii) linking assets at each time with a prescribed copula function. We provide applications to multivariate digital options and spread options.

Cherubini, U., Gobbi, F., Mulinacci, S., Romagnoli, S. (2010). A Copula-Based Model for Spatial and Temporal Dependence of Equity Markets. In Copula Theory and Its Applications, Lecture Notes in Statistics (pp.257-265). DEU : Springer Verlag.

A Copula-Based Model for Spatial and Temporal Dependence of Equity Markets

F. Gobbi;
2010-01-01

Abstract

In this contribution we provide a consistent pricing setting for mul- tivariate equity derivatives. Consistently with the prescriptions of the Efficient Market Hypothesis and of the martingale pricing approach, we provide a model in which prices are martingale both with respect to their own filtration and to the enlarged multivariate filtration. We show that if the log-prices follow processes with independent increments and each one of them is not Granger caused by the others, the pricing procedure can be performed by simply: i) generating time series of each asset; ii) linking assets at each time with a prescribed copula function. We provide applications to multivariate digital options and spread options.
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Cherubini, U., Gobbi, F., Mulinacci, S., Romagnoli, S. (2010). A Copula-Based Model for Spatial and Temporal Dependence of Equity Markets. In Copula Theory and Its Applications, Lecture Notes in Statistics (pp.257-265). DEU : Springer Verlag.
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Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/11365/1150210