Convex Hedging in Incomplete Markets

DOI10.1080/13504860701352206MaRDI QIDQ5440091zbMATH OpenOpenAlexFDO

Authors Birgit Rudloff

Publication date 31 January 2008

Published in Applied Mathematical Finance (Search for Journal in Brave)

Full work available at URL https://arxiv.org/abs/1604.08070

zbMATH Keywords

convex dualityconvex risk measuresgeneralized Neyman-Pearson Lemmahedgingshortfall risk

Mathematics Subject Classification ID

Dynamic programming (90C39) Auctions, bargaining, bidding and selling, and other market models (91B26)

Abstract: In incomplete financial markets not every contingent claim can be replicated by a self-financing strategy. The risk of the resulting shortfall can be measured by convex risk measures, recently introduced by F"ollmer, Schied (2002). The dynamic optimization problem of finding a self-financing strategy that minimizes the convex risk of the shortfall can be split into a static optimization problem and a representation problem. It follows that the optimal strategy consists in superhedging the modified claim $widetildevarphiH$, where $H$ is the payoff of the claim and $widetildevarphi$ is the solution of the static optimization problem, the optimal randomized test. In this paper, we will deduce necessary and sufficient optimality conditions for the static problem using convex duality methods. The solution of the static optimization problem turns out to be a randomized test with a typical $0$-$1$-structure.

Recommendations

• Coherent and convex hedging on Orlicz hearts in incomplete markets
• A framework for dynamic hedging under convex risk measures
• Coherent hedging in incomplete markets
• Efficient hedging: cost versus shortfall risk
• Efficient hedging with coherent risk measure

Cites work

• Barrelledness in topological and ordered vector spaces
• Coherent hedging in incomplete markets
• Coherent measures of risk
• Convex measures of risk and trading constraints
• Efficient hedging with coherent risk measure
• Efficient hedging: cost versus shortfall risk
• Functional Analysis
• scientific article; zbMATH DE number 3930109 (Why is no real title available?)
• scientific article; zbMATH DE number 3504682 (Why is no real title available?)
• scientific article; zbMATH DE number 1351867 (Why is no real title available?)
• scientific article; zbMATH DE number 1095739 (Why is no real title available?)
• scientific article; zbMATH DE number 1795842 (Why is no real title available?)
• Minimizing coherent risk measures of shortfall in discrete‐time models with cone constraints
• Optimization of Convex Risk Functions
• Quantile hedging
• The mathematics of arbitrage

Cited in

(36)

• Incorporating statistical model error into the calculation of acceptability prices of contingent claims
• Approximation of CVaR minimization for hedging under exponential-Lévy models
• Efficient hedging under ambiguity in continuous time
• Valuation and pricing of electricity delivery contracts: the producer's view
• Nonconvex optimization for pricing and hedging in imperfect markets
• Sharpe-ratio pricing and hedging of contingent claims in incomplete markets by convex programming
• Convex hedging of non-superreplicable claims in discrete-time market models
• Claim hedging in an incomplete market
• Coherent and convex hedging on Orlicz hearts in incomplete markets
• A dual representation of gain-loss hedging for European claims in discrete time
• A framework for dynamic hedging under convex risk measures
• Efficient hedging of European options with robust convex loss functionals: a dual-representation formula
• Testing hypotheses for measures with different masses: Four optimization problems
• Duality in a Problem of Static Partial Hedging under Convex Constraints
• The minimal risk of hedging with a convex risk measure
• Coherent hedging in incomplete markets
• Hedging Derivative Securities and Incomplete Markets: An ε-Arbitrage Approach
• Outperformance portfolio optimization via the equivalence of pure and randomized hypothesis testing
• Semimartingales and Hedging in Incomplete Markets
• scientific article; zbMATH DE number 1948538 (Why is no real title available?)
• Duality Formulas for Robust Pricing and Hedging in Discrete Time
• Lower hedging of American contingent claims with minimal surplus risk in finite-state financial markets by mixed-integer linear programming
• Dynamic hedging in incomplete markets using risk measures
• Buyer's quantile hedge portfolios in discrete-time trading
• VaR-based optimal partial hedging
• Quadratic hedging in an incomplete market derived by an influential informed investor
• scientific article; zbMATH DE number 5263208 (Why is no real title available?)
• Solving the problem of partial hedging through a dual problem
• Testing composite hypotheses via convex duality
• The perturbation method applied to a robust optimization problem with constraint
• Risk measure pricing and hedging in incomplete markets
• The Neyman-Pearson lemma for convex expectations
• Optimal hedging with variational preferences under convex risk measures
• Optimal static-dynamic hedges for exotic options under convex risk measures
• On the construction of optimal payoffs
• Shortfall risk minimization versus symmetric (quadratic) hedging

This page was built for publication: Convex Hedging in Incomplete Markets

Report a bug (only for logged in users!)Click here to report a bug for this page (MaRDI item Q5440091)