Essays on Option Pricing, Hedging and Calibration

PhD defense: André M. da Silva Ribeiro

This thesis deals with derivatives pricing, hedging and calibration
problems. We first study the Heston model and we develop a fast plain vanilla
pricing approximation formula to calibrate it. Secondly, we develop an accurate
pricing-correction formula for discretely sampled variance options to be used
with the Heston Model. Thirdly, we consider a Markov-Functional LIBOR model
with jumps, we calibrate it using fast Fourier transform methods, and we use it
to price barrier options. Fourthly, we develop a static spanning relation
between a general payoff written on two different assets and a continuum of
two-asset binary options written on the same assets. Finally, we study correlation
swaps and present a new model to price them.

Principal supervisor: Rolf Poulsen Professor, University of Copenhagen, Denmark

Assessment Committee:

Jesper Lund Pedersen (chairman) Ass. Professor, Math, University of Copenhagen, Denmark

Elisa Nicolato, Ass. Professor, University of Aarhus

Freidrich Hubalek, Ass. Professor, Technische Universität Wien