Financial Engineering Workshop - Peter Carr - NYU Tandon School of Engineering

Peter Carr is the Chair of the Finance and Risk Engineering Department at NYU Tandon School of Engineering. He will be giving an online seminar titled "Adding Optionality" on Wednesday 10th March 2021 from 18:10 -19:15.

Abstract: A Bermudan option gives its owner the right to exercise at two or more future dates. It is well-known and obvious that as we include more and more exercise opportunities, the value goes up. Heuristically, including more exercise opportunities ``adds optionality''. We propose a Bermudan contract and an underlying probabilistic model such that the premium of the Bermudan contract is a pseudo-sum isomorphic to ordinary addition. We thereby solve a dynamic programming problem in closed form. The premium calculation is very simple, using nothing more than the exponential function and its inverse. We then apply the results to calculating DVA under a full collateralization agreement.

Peter Carr is the Chair of the Finance and Risk Engineering Department at NYU Tandon School of Engineering. He has headed various quant groups in the financial industry for the last twenty years. He also presently serves as a trustee for the National Museum of Mathematics and WorldQuant University.