Speaker: Ziyu Zheng was an assistant professor in University of Wisconsin-Milwaukee. He worked for Lehman Brothers and Wells Fargo as a front office quant, for Morgan Stanley as a Risk quant, and was the head of Model Risk Management for Fannie mae and Prudential.

Date: July 26, 2024

Time: 15:00-16:00

Location: B1238, Zhixin Building, Shandong University

Sponsor: School of Mathematics, Shandong University

Abstract:

We introduce a game theory formulation for derivative pricing. We don't rely on the assumptions of unique riskless rate, symmetry in trading and funding, or non-arbitrage condition. We study the asymmetric roles of buy side and sell side. Our formulation relies on three assumptions: buy low sell high, borrow low lend high with constraints, and derivative demand and supply from buy side and sell side. We show that every derivative in every possible state of the world has a price. The market price can be considered as discounting with a market implied Libor reflecting all sell side market participants' funding cost and utility functions via a competitive discounting game. Entity-specific funding valuation adjustment (FVA) does not exist.

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https://www.view.sdu.edu.cn/info/1020/193950.htm