Gain an introduction to a new cutting-edge hedging technique—equity path dependent hedging (retrospective as well as prospective) for life products (annuity and insurance) containing minimum equity benefit guarantees. Start with an overview of predictive equity analytics, then touch on path dependent equity prediction following Bruno Dupire’s 2019 paper “Functional Ito Calculus.” Proceed to highlight path dependency as the logical extension of current standard option theory. Hear about the “bring to life” path dependent option theory by way of empirical numerical examples, replicating portfolio and Asian option approaches relying on predictive equity analytics.
By attending the session, you will:•Understand predictive equity analytics as the basis for path dependent hedging.•Understand the basics of path dependent equity behavior from “Functional Ito Calculus.”•Describe equity path depend stochastic differential equations for options (“Functional Ito Calculus”) and unique optimal path dependent replicating portfolio.•Apply equity path dependent option theory through replicating portfolio or option pricing by way of an empirical life product application example.