The arcsine law for quantile derivatives

A new pricing model for quantile-based derivatives, such as Napoleon options, is presented


Pricing and risk-managing derivatives linked to the quantiles, such as the median, of a distribution has not progressed much beyond the foundational, yet rather theoretical, research of the 1990s. Recent transformational market developments instigated by the Libor reform have thrust the median firmly into the spotlight for quants everywhere, it being the chosen mechanism for specifying the adjustment spread for the Libor rate replacement. In this article, Vladimir

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