Dynamic programming and mean-variance hedging
The paper deals with a market consisting of \(n+1\) primitive assets, one bond of the price process \(S_{t}^{0}=\exp(\int_{0}^{t}r_{u}du)\) and \(n\) risky assets driven by Itô processes. A contingent claim is an \({\mathcal F}_{T}\)-measurable square integrable random variable \(H\). In this context the mean-variance hedging means solving the optimization problem: \[ \min_{\theta\in \Theta}E[H-V_{T}^{x,\theta}]^{2},\quad\text{where}\quad V_{T}^{x,\theta}=S_{T}^{0}\left(x+\int_{0}^{T} \theta'_{t}d(S/S^{0})_{t}\right) \] is the terminal value of a self-financed portfolio in the primitive assets with the initial capital \(x\) and the quantity \(\theta\) invested in the risky assets. The hedging numéraire and the variance-optimal martingale measure appear to be a key tool for characterizing the optimal hedging strategy. Using the dynamic programming methods the authors provide an explicit description of the hedging numéraire and the variance-optimal martingale measure in terms of a value function for a suitable stochastic control problem. The authors study a typical incomplete market framework, a stochastic volatility model. They prove regularity of the value function and derive explicit forms of the hedging numéraire and the variance-optimal martingale measure.
- Dynamic mean-risk optimization in a binomial model
- Mean-variance hedging for general claims
- Mean-variance hedging for pricing European-type contingent claims with transaction costs.
- Mean-variance hedging based on an incomplete market with external risk factors of non-Gaussian OU processes
- Variance-optimal martingale measures for diffusion processes with stochastic coefficients
- Global adapted solution of one-dimensional backward stochastic Riccati equations, with application to the mean-variance hedging.
- Conservative delta hedging.
- The opportunity process for optimal consumption and investment with power utility
- Cone-constrained continuous-time Markowitz problems
- Approximation of CVaR minimization for hedging under exponential-Lévy models
- Asymptotic analysis of the expected utility maximization problem with respect to perturbations of the numéraire
- Optimal robust mean-variance hedging in incomplete financial markets
- Backward stochastic partial differential equations related to utility maximization and hedging
- The use of BSDEs to characterize the mean-variance hedging problem and the variance optimal martingale measure for defaultable claims
- On the structure of general mean-variance hedging strategies
- Robust mean-variance hedging via \(G\)-expectation
- Mean-variance hedging on uncertain time horizon in a market with a jump
- A comparison of option prices under different pricing measures in a stochastic volatility model with correlation
- Mean-variance hedging for stochastic volatility models
- Mean-variance hedging and numéraire
- Mean variance hedging in a general jump market
- Mean-variance portfolio selection based on a generalized BNS stochastic volatility model
- The compatible bond-stock market with jumps
- Investment with Sequence Losses in an Uncertain Environment and Mean-Variance Hedging
- The Minimal Entropy and the Convergence of thep-Optimal Martingale Measures in a General Jump Model
- Mean Variance Hedging in a General Jump Model
- On Bellman's equations for mean and variance control of a Markov diffusion
- The Mean-Variance Hedging of a Defaultable Option with Partial Information
- The Dynamic Convex Valuation Related to the Price Process in a Market with General Jumps
- Mean-variance hedging in large financial markets
- scientific article; zbMATH DE number 1304728 (Why is no real title available?)
- scientific article; zbMATH DE number 2062291 (Why is no real title available?)
- Exponential Hedging and Entropic Penalties
- Pricing European options with stochastic volatility under the minimal entropy martingale measure
- Quantile hedging for guaranteed minimum death benefits with regime switching
- Dynamic programming and mean‐variance hedging in discrete time
- scientific article; zbMATH DE number 2145712 (Why is no real title available?)
- STOCHASTIC VOLATILITY MODELS, CORRELATION, AND THE q‐OPTIMAL MEASURE
- On mean-variance hedging of bond options with stochastic risk premium factor
- Backward Stochastic PDE and Imperfect Hedging
- scientific article; zbMATH DE number 796445 (Why is no real title available?)
- On the parabolic equation for portfolio problems
- Pricing and hedging performance on pegged FX markets based on a regime switching model
- Option pricing under autoregressive random variance models
- Continuous-time portfolio choice under monotone mean-variance preferences -- stochastic factor case
- Structure Conditions under Progressively Added Information
- Option pricing via maximization over uncertainty and correction of volatility smile
- Making mean-variance hedging implementable in a partially observable market
- A PDE representation of the density of the minimal entropy martingale measure in stochastic volatility markets
- MINIMAL VARIANCE HEDGING FOR INSIDER TRADING
- Change of filtrations and mean–variance hedging
- ANALYTICAL COMPARISONS OF OPTION PRICES IN STOCHASTIC VOLATILITY MODELS
- Effectiveness of Hedging Strategies under Model Misspecification and Trading Restrictions
- Derivatives pricing viap-optimal martingale measures: some extreme cases
- Optimal investment strategies with bounded risks, general utilities, and goal achieving
- Claim pricing and hedging under market incompleteness and ``mean-variance preferences
- Mixed hedging under additive market price information
- Quadratic expansions in optimal investment with respect to perturbations of the semimartingale model
- Mean–variance hedging of contingent claims with random maturity
- Numeraire-invariant quadratic hedging and mean-variance portfolio allocation
- Quantile hedging for guaranteed minimum death benefits
- Hedging electricity swaptions using partial integro-differential equations
- Multi-period Mean–Variance Hedging Problem with Model Risk
- Dynamic programming and mean-variance hedging with partial execution risk
- The pricing of liabilities in an incomplete market using dynamic mean-variance hedging
- \(L^{2}\)-approximating pricing under restricted information
This page was built for publication: Dynamic programming and mean-variance hedging
Report a bug (only for logged in users!)Click here to report a bug for this page (MaRDI item Q1297911)
