Calls, zonoids, peacocks and log-concavity
Michael R. Tehranchi
TL;DR
This paper characterizes log-concave densities using lift zonoids associated with peacocks, linking geometric concepts to financial mathematics and arbitrage-free asset pricing.
Contribution
It introduces two new characterizations of log-concavity via lift zonoids and connects these to financial models involving peacocks.
Findings
Characterization of log-concave densities through lift zonoids
Connection between geometric properties and arbitrage-free pricing
New insights into the structure of peacocks in finance
Abstract
The main results are two characterisations of log-concave densities in terms of the collection of lift zonoids corresponding to a peacock. These notions are recalled and connected to arbitrage-free asset pricing in financial mathematics.
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Taxonomy
TopicsStochastic processes and financial applications · Economic theories and models · Financial Risk and Volatility Modeling