TY  - JOUR
A1  - Escobar, Marcos
A1  - Panz, Sven
T1  - A note on the impact of parameter uncertainty on barrier derivatives
T2  - Risks
N2  - This paper presents a comprehensive extension of pricing two-dimensional derivatives depending on two barrier constraints. We assume randomness on the covariance matrix as a way of generalizing. We analyse common barrier derivatives, enabling us to study parameter uncertainty and the risk related to the estimation procedure (estimation risk). In particular, we use the distribution of empirical parameters from IBM and EURO STOXX50. The evidence suggests that estimation risk should not be neglected in the context of multidimensional barrier derivatives, as it could cause price differences of up to 70%.
KW  - barrier options
KW  - estimation risk
KW  - random covariance
KW  - structured products
Y1  - 2017
UR  - http://publikationen.ub.uni-frankfurt.de/frontdoor/index/index/docId/44221
UR  - https://nbn-resolving.org/urn:nbn:de:hebis:30:3-442216
SN  - 2227-9091
N1  - This is an open access article distributed under the Creative Commons Attribution License which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited. (CC BY 4.0).
VL  - 4
IS  - 4, Art. 35
SP  - 1
EP  - 25
PB  - MDPI
CY  - Basel
ER  -