Asymptotically optimal discretization of hedging strategies with jumps (Q2454402): Difference between revisions

The authors consider the hedging error due to discrete trading in models with jumps. They extend an approach of \textit{M. Fukasawa} [Prog. Probab. 65, 331--346 (2011; Zbl 1246.91130)] for discrete hedging at high frequency and propose a framework for an asymptotic optimization of the discretization times. According to their approach, a discretization rule is said to be optimal if for a given cost function no strategy has (asymptotically, for large cost) a lower mean square discretization error for a smaller cost. The results are focused mainly on discretization rules based on hitting times. In this class, explicit expressions for the optimal rules are given.