Variance-optimal hedging for processes with stationary independent increments
From MaRDI portal
(Redirected from Publication:997954)
Abstract: We determine the variance-optimal hedge when the logarithm of the underlying price follows a process with stationary independent increments in discrete or continuous time. Although the general solution to this problem is known as backward recursion or backward stochastic differential equation, we show that for this class of processes the optimal endowment and strategy can be expressed more explicitly. The corresponding formulas involve the moment, respectively, cumulant generating function of the underlying process and a Laplace- or Fourier-type representation of the contingent claim. An example illustrates that our formulas are fast and easy to evaluate numerically.
Recommendations
- Variance optimal hedging for continuous time additive processes and applications
- Variance-Optimal Hedging in Discrete Time
- Quadratic hedging in affine stochastic volatility models
- Variance-optimal hedging for time-changed Lévy processes
- Variance-Optimal Hedging in General Affine Stochastic Volatility Models
Cites work
- scientific article; zbMATH DE number 4085365 (Why is no real title available?)
- scientific article; zbMATH DE number 1022658 (Why is no real title available?)
- scientific article; zbMATH DE number 1944678 (Why is no real title available?)
- scientific article; zbMATH DE number 2006037 (Why is no real title available?)
- scientific article; zbMATH DE number 1466110 (Why is no real title available?)
- scientific article; zbMATH DE number 1834045 (Why is no real title available?)
- scientific article; zbMATH DE number 1402217 (Why is no real title available?)
- scientific article; zbMATH DE number 3273551 (Why is no real title available?)
- scientific article; zbMATH DE number 3060406 (Why is no real title available?)
- A complete explicit solution to the log-optimal portfolio problem.
- A guided tour through quadratic hedging approaches
- A utility maximization approach to hedging in incomplete markets
- Approximating random variables by stochastic integrals
- Bounds on European option prices under stochastic volatility
- Calcul stochastique et problèmes de martingales
- Conditions for optimality in the infinite-horizon portfolio-cum-saving problem with semimartingale investments
- Consumption and portfolio policies with incomplete markets and short-sale constraints: The infinite dimensional case
- Convex duality in constrained portfolio optimization
- Dynamic Programming and Pricing of Contingent Claims in an Incomplete Market
- Efficient hedging: cost versus shortfall risk
- Existence and uniqueness of an optimum in the infinite-horizon portfolio-cum-saving model with semimartingale investments
- Exponential Hedging and Entropic Penalties
- Föllmer-Schweizer decomposition and mean-variance hedging for general claims
- Hyperbolic distributions in finance
- Martingale and Duality Methods for Utility Maximization in an Incomplete Market
- Martingale laws, densities and decomposition of Föllmer-Schweizer
- Mean-variance hedging in continuous time
- On Quadratic Cost Criteria for Option Hedging
- On the Representation of a Function by Certain Fourier Integrals
- On the range of options prices
- Optimal investment in incomplete markets when wealth may become negative.
- Optimal portfolios for logarithmic utility.
- Option hedging for semimartingales
- Option pricing when underlying stock returns are discontinuous
- Processes of normal inverse Gaussian type
- Super-replication in stochastic volatility models under portfolio constraints
- The Variance Gamma Process and Option Pricing
- The asymptotic elasticity of utility functions and optimal investment in incomplete markets
- The cumulant process and Esscher's change of measure
- The effects of the risk of fire on the optimal rotation of a forest
- The normal inverse gaussian lévy process: simulation and approximation
- Variance-Optimal Hedging in Discrete Time
- Variance-optimal hedging for processes with stationary independent increments
- \(\mathcal E\)-martingales and their applications in mathematical finance
Cited in
(49)- Variance-optimal hedging for processes with stationary independent increments
- A comprehensive mathematical approach to exotic option pricing
- On the explicit evaluation of the geometric Asian options in stochastic volatility models with jumps
- Explicit formulas for the minimal variance hedging strategy in a martingale case
- Analysis of Fourier transform valuation formulas and applications
- Approximate pricing of swaptions in affine and quadratic models
- Quantization causes waves: smooth finitely computable functions are affine
- Hedging strategies for energy derivatives
- Efficient Hedging When Asset Prices Follow A Geometric Poisson Process With Unknown Intensities
- Approximation of CVaR minimization for hedging under exponential-Lévy models
- Portfolio management with benchmark related incentives under mean reverting processes
- Optimal hedging in incomplete markets
- Model uncertainty, recalibration, and the emergence of delta-vega hedging
- Quadratic hedging in affine stochastic volatility models
- Simplified stochastic calculus with applications in economics and finance
- BSDEs, càdlàg martingale problems, and orthogonalization under basis risk
- Pricing and hedging of general rating-sensitive claims in a jump-diffusion market model in the presence of stochastic factors
- Variance-optimal hedging for time-changed Lévy processes
- On some expectation and derivative operators related to integral representations of random variables with respect to a PII process
- Model risk and discretisation of locally risk-minimising strategies
- GKW representation theorem under restricted information. An application to risk-minimization
- Semi-static variance-optimal hedging in stochastic volatility models with Fourier representation
- On the performance of delta hedging strategies in exponential Lévy models
- Delta hedging in discrete time under stochastic interest rate
- Asymptotically optimal discretization of hedging strategies with jumps
- Approximation of stochastic integrals with jumps via weighted BMO approach
- On the structure of general mean-variance hedging strategies
- Hedging strategies for discretely monitored Asian options under Lévy processes
- Robustness of quadratic hedging strategies in finance via Fourier transforms
- Mean-variance hedging based on an incomplete market with external risk factors of non-Gaussian OU processes
- Geometric Asian option pricing in general affine stochastic volatility models with jumps
- Variance-Optimal Hedging in General Affine Stochastic Volatility Models
- Asymptotic power utility-based pricing and hedging
- Fourier transform methods for regime-switching jump-diffusions and the pricing of forward starting options
- A discrete-time hedging framework with multiple factors and fat tails: on what matters
- On mean-variance hedging under partial observations and terminal wealth constraints
- Non-parametric pricing and hedging of exotic derivatives
- Mean-variance hedging for discontinuous semimartingales.
- Variance-optimal hedging for Asian options under independent increments processes
- On suboptimality of delta hedging for Asian options
- A numerically efficient closed-form representation of mean-variance hedging for exponential additive processes based on Malliavin calculus
- Approximate indifference pricing in exponential Lévy models
- Hedging error estimate of the American put option problem in jump-diffusion processes
- MEAN–VARIANCE HEDGING AND OPTIMAL INVESTMENT IN HESTON'S MODEL WITH CORRELATION
- VALUATION OF FLOATING RANGE NOTES IN LÉVY TERM‐STRUCTURE MODELS
- Variance-optimal hedging for target volatility options
- Evaluating discrete dynamic strategies in affine models
- Variance optimal hedging for continuous time additive processes and applications
- Asymptotic analysis of hedging errors in models with jumps
This page was built for publication: Variance-optimal hedging for processes with stationary independent increments
Report a bug (only for logged in users!)Click here to report a bug for this page (MaRDI item Q997954)
