Farid AitSahlia

Ph.D., Stanford University
Risk management, financial engineering, stochastic control, sequential analysis

Contact Information
	472 Weil Hall (352) 392-1464 ext. 2054
Links
	· Biographical sketch · Curriculum vitae · Past courses · Current course (Spring 2008) · Risk Management and Quantitative Finance Conference (Spring 2005) · International Conference on Financial Engineering (Spring 2006) · Workshop on New Directions in Quantitative Finance (Spring 2008)

Research Interests

In its broadest sense, my research program involves the determination of sequential and optimal decisions in uncertain environments. With a view towards reducing risk, my application domains are principally in financial engineering and operations management. I am particularly interested in the pricing and hedging of derivatives with complex payoffs and American-style (early) exercise. I am also interested in the contingent claims perspective in operations management. One approach is to consider operational hedging in the presence of financial markets (e.g. commodities contracts.) Another is to devise contractual strategies based on financial engineering methodologies to account for supply and demand contingencies (e.g. sub-contracting.)

The types of problems above do not generally lend themselves to closed-form solutions. They therefore require efficient numerical methods to engineer their solutions. In the course of my research, and over an extensive industrial career, I have come to focus on the interplay between continuous and discrete models. With the help of certain probabilistic properties, the former can lead to substantive characterizations, which in turn set the stage for efficient numerical implementations.

Selected Publications

“ Corrected Random Walk Approximations to Free Boundary Problems in Optimal Stopping" (with T. L. Lai and Y. C. Yao), Advances in Applied Probability, vol. 39, 3 (2007), 753-775.(link)

“A Canonical Optimal Stopping Problem for American Options Under a Double-Exponential Jump-Diffusion Model" (with A. Runnemo), Journal of Risk, Vol. 10, 2007, pp. 85-100.(link)

“Pricing and Hedging American Knock-In Options,” F. AitSahlia, L. Imhof and T. L. Lai, J. of Derivatives, Vol. 11, 2004, pp 44-50. (link)

“Fast and Accurate Valuation of American Barrier Options,” F. AitSahlia, L. Imhof and T. L. Lai, J. Computational Finance, Vol. 7, 2003, pp 129-145.(link)

“Exercise Boundaries and Efficient Approximations to American Option Prices and Hedge Parameters,” F. AitSahlia and T. L. Lai, J. Computational Finance, Vol. 4, 2001, pp 85-103.(link)

“A Canonical Optimal Stopping Problem for American Options and its Numerical Solution,” F. AitSahlia, and T. L. Lai, J. Computational Finance, Vol. 3, Winter 1999/2000, pp 33-52.(link)

“Random Walk Duality and the Valuation of Discrete Lookback Options,” F. AitSahlia and T. L. Lai, Applied Mathematical Finance, Vol. 5, 1998, pp 277-340.(link)

“Valuation of Discrete Barrier and Hindsight Options,” F. AitSahlia and T. L. Lai, J. Financial Engineering, Vol. 6, 1997, pp 169-177.

“American Options: A Comparison of Numerical Methods,” F. AitSahlia and P. Carr, in Numerical Methods in Finance, C. Rogers and D. Talay (eds.), Cambridge University Press, 1997.

“Is Concurrent Engineering Always a Sensible Proposition?,” F. AitSahlia, E. Johnson and P. Will, IEEE Transactions on Engineering Management, Vol. 42, 1995, pp 166-170.

Book

Elementary Probability Theory with Stochastic Processes and an Introduction to Mathematical Finance, 4^th edition, K. L. Chung and F. AitSahlia, Springer-Verlag, March, 2003. Russian edition appeared in 2007.