Optimal robust mean-variance hedging in incomplete financial markets

DOI10.1007/S10958-008-9128-XMaRDI QIDQ2255960zbMATH OpenOpenAlexFDO

Authors Yanyan Li

Publication date 18 February 2015

Published in Journal of Mathematical Sciences (New York) (Search for Journal in Brave)

Full work available at URL https://arxiv.org/abs/0805.0122

zbMATH Keywords

mean-variance hedgingincomplete financial marketsoptimal \(B\)-robust estimate

Mathematics Subject Classification ID

Portfolio theory (91G10) Stochastic ordinary differential equations (aspects of stochastic analysis) (60H10) Martingales with continuous parameter (60G44)

Abstract: Optimal B-robust estimate is constructed for multidimensional parameter in drift coefficient of diffusion type process with small noise. Optimal mean-variance robust (optimal V -robust) trading strategy is find to hedge in mean-variance sense the contingent claim in incomplete financial market with arbitrary information structure and misspecified volatility of asset price, which is modelled by multidimensional continuous semimartingale. Obtained results are applied to stochastic volatility model, where the model of latent volatility process contains unknown multidimensional parameter in drift coefficient and small parameter in diffusion term.

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