Explicit solutions for shortfall risk minimization in multinomial models.
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The authors show how to obtain an explicit solution for the shortfall risk minimization in multinomial models. Their result generalizes the results of \textit{W. J. Runggaldier, B. Trivellato} and \textit{T. Vargilou}, [Prog. Probab. 52, 243-258 (2002; Zbl 1060.91086)] which states that the minimal shortfall is the difference between the arbitrage free price and the initial capital, times the minimum of the density dP/dQ. First the result is obtained for the complete model and then for incomplete trinomial model.
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