Risk minimizing of derivatives via dynamic g-expectation and related topics
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Publication:6234948
arXiv1208.2068MaRDI QIDQ6234948FDOQ6234948
Authors: Tianxiao Wang 
Publication date: 9 August 2012
Abstract: In this paper, we investigate risk minimization problem of derivatives based on non-tradable underlyings by means of dynamic g-expectations which are slight different from conditional g-expectations. In this framework, inspired by [1] and [16], we introduce risk indifference price, marginal risk price and derivative hedge and obtain their corresponding explicit expressions. The interesting thing is that their expressions have nothing to do with nonlinear generator g, and one deep reason for this is due to the completeness of financial market. By giving three useful special risk minimization problems, we obtain the explicit optimal strategies with initial wealth involved, demonstrate some qualitative analysis among optimal strategies, risk aversion parameter and market price of risk, together with some economic interpretations.
Stochastic ordinary differential equations (aspects of stochastic analysis) (60H10) Applications of stochastic analysis (to PDEs, etc.) (60H30)
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