Fractional smoothness and applications in finance

DOI10.1007/978-3-642-18412-3_12zbMATH Open1236.91132arXiv1004.3577OpenAlexW2951854295MaRDI QIDQ5198565FDOQ5198565

Stefan Geiss, Emmanuel Gobet

Publication date: 8 August 2011

Published in: Advanced Mathematical Methods for Finance (Search for Journal in Brave)

Abstract: This overview article concerns the notion of fractional smoothness of random variables of the form $g(X_T)$, where $X=(X_t{)}_{tin[0,T]}$ is a certain diffusion process. We review the connection to the real interpolation theory, give examples and applications of this concept. The applications in stochastic finance mainly concern the analysis of discrete time hedging errors. We close the review by indicating some further developments.

Full work available at URL: https://arxiv.org/abs/1004.3577

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zbMATH Keywords

interpolationfractional smoothnessdiscrete time hedging

Mathematics Subject Classification ID

Derivative securities (option pricing, hedging, etc.) (91G20) Stochastic calculus of variations and the Malliavin calculus (60H07) Portfolio theory (91G10) Stochastic integrals (60H05) Rate of convergence, degree of approximation (41A25) Interpolation between normed linear spaces (46B70)

Cited In (7)

• Title not available (Why is that?)
• Backward stochastic differential equations with non-Markovian singular terminal values
• Fractional stochastic differential equations with applications to finance
• Weak rate of convergence of the Euler-Maruyama scheme for stochastic differential equations with non-regular drift
• A comparison study of bank data in fractional calculus
• Almost sure optimal hedging strategy
• Discrete time hedging errors for options with irregular payoffs

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