Informatics and Applications

2023, Volume 17, Issue 1, pp 107-115

MULTIDIMENSIONAL BUTTERFLIES IN PROBLEMS OF OPTIMIZATION ON CC-VaR

  • G. A. Agasandyan

Abstract

The work continues studying problems of using continuous VaR-criterion (CC-VaR) in financial markets. Again some technical problems are concerned. However, they emerge this time not in multidimensional relatively simple binary markets but in multidimensional markets that are an extension of one-dimensional traditional markets of options such as calls and puts. In assumption that scenario butterflies are not traded in markets directly a method of receiving their replication from multidimensional options, i. e., -options, is developed. It is based on options parity theorems and can be applied to markets of arbitrary dimension, but actual realization is conducted for two-dimensional markets. The bases constructions in terms of -options both one-type and natural mixed with selected market center are produced. Theoretical representations of optimal portfolios in these bases accompanied with the payoffs diagram are illustrated by the distinctive example of a two-dimensional market.

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