Open AccessOn Approximate Pricing of Spread Options via Conditional Value-at-Risk
Author(s) -
Ч. Максимов,
Alexander Melnikov
Publication year - 2021
Publication title -
review of business and economics studies
Language(s) - English
Resource type - Journals
eISSN - 2311-0279
pISSN - 2308-944X
DOI - 10.26794/2308-944x-2021-9-3-27-51
Subject(s) - expected shortfall , value (mathematics) , valuation of options , value at risk , risk management , conditional expectation , actuarial science , econometrics , economics , computer science , mathematical optimization , mathematics , finance , machine learning
It is widely accepted to use conditional value-at-risk for risk management needs and option pricing. As a rule, there are difficulties in exact calculations of conditional value-at-risk. In the paper, we use the conditional value-at-risk methodology to price spread options, extending some approximation approaches for these needs. Our results we illustrate by numerical calculations which demonstrate their effectiveness. We also show how conditional value-at-risk pricing can help with regulatory needs inspired by the Basel Accords.