Mathematical Finance and Probability Seminars (Since covid these events are taking place online.)

Physical and risk-free density estimation in the energy market

Tuesday, November 29, 2011 at 11:30am - 12:30pm

Speaker: Peter Laurence, University of Rome and NYU

Based on ground breaking work of Tabak and VandenEijdn, this talk describes a new family of algorithms for probability density estimation, applied to time series for futures in the markets for gas and crude oil. The procedure works through fluid-like flows in the space of prices, with the actual observations playing the role of active Lagrangian markers that guide the flow through the maximization of their log-likelihood. The corresponding risk-free measure can also be estimated, by imposing the constraints provided by option prices and the martingale condition. These translate -- through importance sampling -- into local constraints on the flows. (Joint work with Esteban Tabak and Ricardo Pignol.)

Speaker: Peter Laurence, University of Rome and NYU

Location   Hill 705