arXiv subjects

Jarno Talponen

Publications and source records attributed to Jarno Talponen.

At least 19 recordsLinked to original sources

arXiv2018

Matching distributions: Asset pricing with density shape correction

We investigate a statistical-static hedging technique for pricing assets considered as single-step stochastic cash flows. The valuation is based on constructing in a canonical way a European style derivative on a benchmark security such that the physical payoff distribution coincides with the (corrected) physical asset price distribution. It turns out that this pricing technique is economically viable under some natural cases. The fundamental properties of the pricing rule arising in this way are investigated here. This gives rise to a novel way of estimating state price density. Our approach has some tangible benefits: its principle is transparent, and it is easy to implement numerically while avoiding many issues typically involved in such an estimation. As an application, it is shown how this method can be used in performing kurtosis corrections to the standard Black-Scholes-Merton model by a mixture of several types of distributions. In fact, the technique is non-parametric in nature, and it can handle in principle any physical distribution, e.g., a multimodal one. Some other interesting applications are discussed as well.

q-fin.PR↗

arXiv2018

Matching distributions: Recovery of implied physical densities from option prices

We introduce a non-parametric method to recover physical probability distributions of asset returns based on their European option prices and some other sparse parametric information. Thus the main problem is similar to the one considered foir instance in the Recovery Theorem by Ross (2015), except that here we consider a non-dynamical setting. The recovery of the distribution is complete, instead of estimating merely a finite number of its parameters, such as implied volatility, skew or kurtosis. The technique is based on a reverse application of recently introduced Distribution Matching by the author and is related to the ideas in Distribution Pricing by Dybvig (1988) as well as comonotonicity.

q-fin.PR↗

arXiv2018

Option pricing: A yet simpler approach

We provide a lean, non-technical exposition on the pricing of path-dependent and European-style derivatives in the Cox-Ross-Rubinstein (CRR) pricing model. The main tool used in the paper for cleaning up the reasoning is applying static hedging arguments. This can be accomplished by taking various routes through some auxiliary considerations, namely Arrow-Debreu securities, digital options or backward random processes. In the last case the CRR model is extended to an infinite state space which leads to an interesting new phenomenon not present in the classical CRR model. At the end we discuss the paradox involving the drift parameter $μ$ in the BSM model pricing. We provide sensitivity analysis and the speed of converge for the asymptotically vanishing drift.

q-fin.MF↗

arXiv2018

Decompositions of Nakano norms by ODE techniques

We study decompositions of Nakano type varying exponent Lebesgue norms and spaces. These function spaces are represented here in a natural way as tractable varying $\ell^p$ sums of projection bands. The main results involve embedding the varying Lebesgue spaces to such sums, as well as the corresponding isomorphism constants. The main tool applied here is an equivalent variable Lebesgue norm which is defined by a suitable ordinary differential equation introduced recently by the author. We also analyze the effect of transformations changing the ordering of the unit interval on the values of the ODE-determined norm.

math.CA↗

arXiv2017

Observations on quasihyperbolic geometry modeled on Banach spaces

In this paper, we continue our study of quasihyperbolic metric in Banach spaces. The main results of the paper present a criterion for smoothness of geodesics of quasihyperbolic type metrics in Banach spaces, under a Dini type condition on the weight function, which improves an earlier result of the two first authors. We also answer to a question posed by the two first authors in an earlier paper with R. Klén, and present results related to the question on smoothness of quasihyperbolic balls.

math.FA↗

arXiv2017

Note on a kind of Bishop-Phelps-Bollobás property for operators

We study a Bishop-Phelps-Bollobás type property for Banach space operators introduced by Dantas (2017). In that paper there is a local and a global version of a natural property which is somewhat similar but simpler compared to the Bishop-Phelps-Bollobás type property for operators studied in Acosta et al. (2008). Here we characterize the mentioned local property in the setting with strictly convex domain spaces and compact operators. We show that the local property implies that the domain space has strong convexity properties.

math.FA↗

arXiv2017

Duality of ODE-determined norms

Recently a new approach to varying exponent $L^{p(\cdot)}$ space norms employing weak solutions to first order ordinary differential equations was initiated by the author. The duality of these ODE-determined $L^{p(\cdot)}$ spaces is analyzed here. The superreflexivity of these spaces is characterized under the anticipated conditions. A universal space construction is also given for these spaces.

math.FA↗

arXiv2016

ODE to $L^p$ norms

In this paper we relate the geometry of Banach spaces to the theory of differential equations, apparently in a new way. We will construct Banach function space norms arising as weak solutions to ordinary differential equations of first order. This provides as a special case a new way of defining varying exponent $L^p$ spaces, different from the Orlicz type approach. We explain heuristically how the definition of the norm by means of the particular ODE is justified. The resulting class of spaces includes the classical $L^p$ spaces as a special case. We present an ODE-free means of defining the norms investigated.

math.FA↗

arXiv2016

Unconditional and bimonotone structures in high density Banach spaces

It is shown that every normalized weakly null sequence of length $κ_λ$ in a Banach space has a subsequence of length $λ$ which is an unconditional basic sequence; here $κ_λ$ is a large cardinal depending on a given infinite cardinal $λ$. Transfinite topological games on Banach spaces are analyzed which determine the existence of a long unconditional basic sequence. Then 'asymptotic disentanglement' condition in a transfinite setting is studied which ensures a winning strategy for the unconditional basic sequence builder in the above game. The following problem is investigated: When does a Markushevich basic sequence with length uncountable regular cardinal $κ$ admit a subsequence of the same length which is a bimonotone basic sequence? Stabilizations of projectional resolutions of the identity (PRI) are performed under a density contravariance principle to gain some additional strong regularity properties, such as bimonotonicity.

math.FA↗

arXiv2015

Open-point topological games and productivity of dense-separable property

In this note we study the open-point topological games in order to analyze the least upper bound for density of dense subsets of a topological space. This way we may also analyze the behavior of such cardinal invariants in taking products of spaces. Various related cardinal equalities and inequalities are given. As an application we take a look at Banach spaces with the property (CSP) which can be formulated by stating that each weak-star dense linear subspace of the dual is weak-star separable.

math.GN↗

arXiv2015

Uniform-to-proper duality of geometric properties of Banach spaces and their ultrapowers

In this note various geometric properties of a Banach space $X$ are characterized by means of weaker corresponding geometric properties involving an ultrapower $X^\mathcal{U}$. The characterizations do not depend on the particular choice of the free ultrafilter $\mathcal{U}$. For example, a point $x\in S_X$ is an MLUR point if and only if $j(x)$ (given by the canonical inclusion $j\colon X \to X^\mathcal{U}$) in $B_{X^\mathcal{U}}$ is an extreme point; a point $x\in S_X$ is LUR if and only if $j(x)$ is not contained in any non-degenerate line segment of $S_{X^\mathcal{U}}$; a Banach space $X$ is URED if and only if there are no $x,y \in S_{X^\mathcal{U}}$, $x\neq y$, with $x-y \in j(X)$.

math.FA↗

arXiv2015

On natural density, orthomodular lattices, measure algebras and non-distributive $L^p$ spaces

In this note we show, roughly speaking, that if $\mathcal{B}$ is a Boolean algebra included in the natural way in the collection $\mathcal{D}/_\sim$ of all equivalence classes of natural density sets of the natural numbers, modulo null density, then $\mathcal{B}$ extends to a $σ$-algebra $Σ\subset \mathcal{D}/_\sim$ and the natural density is $σ$-additive on $Σ$. We prove the main tool employed in the argument in a more general setting, involving a kind of quantum state function, more precisely, a group-valued submeasure on an orthomodular lattice. At the end we discuss the construction of `non-distributive $L^p$ spaces' by means of submeasures on lattices.

math.FA↗

arXiv2015

Diameter 2 properties and convexity

We present an equivalent midpoint locally uniformly rotund (MLUR) renorming $X$ of $C[0,1]$ on which every weakly compact projection $P$ satisfies the equation $\|I-P\| = 1+\|P\|$ ($I$ is the identity operator on $X$). As a consequence we obtain an MLUR space $X$ with the properties D2P, that every non-empty relatively weakly open subset of its unit ball $B_X$ has diameter 2, and the LD2P+, that for every slice of $B_X$ and every norm 1 element $x$ inside the slice there is another element $y$ inside the slice of distance as close to 2 from $x$ as desired. An example of an MLUR space with the D2P, the LD2P+, and with convex combinations of slices of arbitrary small diameter is also given.

math.FA↗

arXiv2015

Note on order-isomorphic isometric embeddings of some recent function spaces

We investigate certain recently introduced ODE-determined varying exponent $L^p$ spaces. It turns out that these spaces are finitely representable in a concrete universal varying exponent $\ell^p$ space. Moreover, this can be accomplished in a natural unified fashion. This leads to order-isomorphic isometric embeddings of all of the above $L^p$ spaces to an ultrapower of the above varying exponent $\ell^p$ space.

math.FA↗

arXiv2015

Convex-transitive Douglas algebras

The convex-transitivity property can be seen as a convex generalization of the almost transitive (or quasi-isotropic) group action of the isometry group of a Banach space on its unit sphere. We will show that certain Banach algebras, including conformal invariant Douglas algebras, are weak-star convex-transitive. Geometrically speaking, this means that the investigated spaces are highly symmetric. Moreover, it turns out that the symmetry property is satisfied by using only `inner' isometries, i.e. a subgroup consisting of isometries which are homomorphisms on the algebra. In fact, weighted composition operators arising from function theory on the unit disk will do. Some interesting examples are provided at the end.

math.OA↗

arXiv2014

On volatility smile and an investment strategy with out-of-the-money calls

A motivating question in this paper is whether a sensible investment strategy may systematically contain long positions in out-of-the-money European calls with short expiry. Here we consider a very simple trading strategy for calls. The main points of this note are the following. First, the presented trading strategy appears very lucrative in the Black-Scholes-Merton (BSM) framework. In fact, it is such even to the extent that the BSM model turns out to be, in a sense, incompatible with the CAPM. Second, if one wishes to adapt these models together, then the adjustment of the consistent pricing rule (i.e. modifying state price densities) inevitably leads to some form of volatility smile and this is the main point of the paper. Moreover, these observations arise from purely structural considerations.

q-fin.MF↗

arXiv2014

On smoothness of quasihyperbolic balls

We investigate properties of quasihyperbolic balls and geodesics in Euclidean and Banach spaces. Our main result is that in uniformly smooth Banach spaces a quasihyperbolic ball of a convex domain is $C^1$-smooth. The question about the smoothness of quasihyperbolic balls is old, originating back to the discussions of F.W. Gehring and M. Vuorinen in 1970's. To our belief, the result is new also in the Euclidean setting. We also address some other issues involving the smoothness of quasihyperbolic balls. We introduce an interesting application of quasihyperbolic metrics to renormings of Banach spaces. To provide a useful tool for this approach we turn our attention to the variational stability of quasihyperbolic geodesics. Several examples and illustrations are provided.

math.FA↗

arXiv2014

Multidimensional Breeden-Litzenberger representation for state price densities and static hedging

In this article, we consider European options of type $h(X^1_T, X^2_T,\ldots, X^n_T)$ depending on several underlying assets. We study how such options can be valued in terms of simple vanilla options in non-specified market models. We consider different approaches related to static hedging and derive several pricing formulas for a wide class of payoff functions $h:\R_+^n\rightarrow \R$. We also give new relations between prices of different options both in one dimensional and multidimensional case.

math.PR↗