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Revision as of 19:55, 19 March 2024
scientific article
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English | Föllmer-Schweizer decomposition and mean-variance hedging for general claims |
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Föllmer-Schweizer decomposition and mean-variance hedging for general claims (English)
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15 January 1996
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Because of some motivations in financial mathematics, it is interesting to look for the decomposition of a square integrable \({\mathcal F}_T\)- measurable random variable into the sum of an \({\mathcal F}_0\)-measurable random variable, a stochastic integral with respect to some given special semimartingale \(X\), and a martingale which is orthogonal to every stochastic integral with respect to the martingale part of \(X\). This is the so-called Föllmer-Schweizer decomposition. The authors prove existence and uniqueness of such a decomposition under the assumption that the mean-variance tradeoff process of \(X\) is uniformly bounded; moreover, this decomposition is shown to be continuous with respect to the quadratic norm.
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semimartingales
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orthogonal martingales
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financial mathematics
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Föllmer-Schweizer decomposition
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