CONDITIONAL-MEAN HEDGING UNDER TRANSACTION COSTS IN GAUSSIAN MODELS

DOI10.1142/S0219024918500152MaRDI QIDQ4634641zbMATHOpenAlexWikidataFDO

Authors Tommi Sottinen, Lauri Viitasaari

Publication date 11 April 2018

Published in International Journal of Theoretical and Applied Finance (Search for Journal in Brave)

Full work available at URL https://arxiv.org/abs/1708.03242

zbMATH Keywords

predictionoption pricingtransaction costsdelta-hedging

Mathematics Subject Classification ID

Derivative securities (option pricing, hedging, etc.) (91G20) Fractional processes, including fractional Brownian motion (60G22) Applications of stochastic analysis (to PDEs, etc.) (60H30)

Abstract: We consider so-called regular invertible Gaussian Volterra processes and derive a formula for their prediction laws. Examples of such processes include the fractional Brownian motions and the mixed fractional Brownian motions. As an application, we consider conditional-mean hedging under transaction costs in Black-Scholes type pricing models where the Brownian motion is replaced with a more general regular invertible Gaussian Volterra process.

Recommendations

• Mean-variance hedging under transaction costs
• Mean-variance hedging for pricing European-type contingent claims with transaction costs.
• Approximate hedging problem with transaction costs in stochastic volatility markets
• Approximate hedging of contingent claims under transaction costs for general pay-offs
• Optimal hedging in an extended binomial market under transaction costs
• Limit theorems for partial hedging under transaction costs
• Risk measure pricing and hedging in the presence of transaction costs
• Hedging options under transaction costs and stochastic volatility
• Approximate Hedging with Constant Proportional Transaction Costs in Financial Markets with Jumps
• A TRANSACTION COST CONVERGENCE RESULT FOR GENERAL HEDGING STRATEGIES

Cites work

• scientific article; zbMATH DE number 3721834 (Why is no real title available?)
• scientific article; zbMATH DE number 5220411 (Why is no real title available?)
• Fractional processes as models in stochastic finance
• Hedging in fractional Black-Scholes model with transaction costs
• Markets with transaction costs. Mathematical theory.
• Mean square error for the Leland-Lott hedging strategy: convex pay-offs
• Mixed Gaussian processes: a filtering approach
• Prediction law of fractional Brownian motion
• Pricing by hedging and no-arbitrage beyond semimartingales
• Robust replication in \(H\)-self-similar Gaussian market models under uncertainty
• Stochastic analysis of Gaussian processes via Fredholm representation
• Stochastic calculus for fractional Brownian motion and related processes.

Cited in

(1)

• Hedging in fractional Black-Scholes model with transaction costs

Describes a project that uses

Uses Software

• GAUSSIAN

This page was built for publication: CONDITIONAL-MEAN HEDGING UNDER TRANSACTION COSTS IN GAUSSIAN MODELS

Report a bug (only for logged in users!)Click here to report a bug for this page (MaRDI item Q4634641)