Informatics and Applications
2022, Volume 16, Issue 2, pp 2-10
MULTIDIMENSIONAL BINARY MARKETS AND CC-VaR
Abstract
The work further investigates the problems of using the continuous VaR-criterion (CC VaR) in financial
markets. It deals with some technical problems arising in multidimensional markets - markets generated by several
stochastically connected underliers. The multidimensional extension of binary markets, a simplified markets
variant of traditional options such as calls and puts, is considered. They are also the simplest extension of scenario
markets in discrete-on-instruments markets. Based on the supposition that scenario indicators are not fully traded
in the market directly, an approach to replicating such indicators by binary instruments is suggested. This approach
is based on the parity theorems for one-dimensional markets. It is formed for multidimensional markets and is
described in details for two-dimensional markets. The constructions of bases for both single-type versions and the
natural mixed version with a fixed market center are given. The theoretical constructions with optimal portfolios
representations in these bases are illustrated on the example of a specific two-dimensional market.
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[+] About this article
Title
MULTIDIMENSIONAL BINARY MARKETS AND CC-VaR
Journal
Informatics and Applications
2022, Volume 16, Issue 2, pp 2-10
Cover Date
2022-07-25
DOI
10.14357/19922264220201
Print ISSN
1992-2264
Publisher
Institute of Informatics Problems, Russian Academy of Sciences
Additional Links
Key words
underliers; multidimensional market; investor's risk preferences function; continuous VaR-criterion;
cost and forecast densities; scenario indicators; bases; binary options; one-type portfolio; market center; mixed portfolio
Authors
G. A. Agasandyan 
Author Affiliations
Federal Research Center "Computer Science and Control" of the Russian Academy of Sciences, 44-2 Vavilov Str., Moscow 119333, Russian Federation
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