Arbeitspapier

Efficient hedging: Cost versus shortfall risk

An investor faced with a contingent claim may eliminate risk by (super-)hedging in a financial market. As this is often quite expensive, we study partial hedges, which require less capital and reduce the risk. In a previous paper we determined quantile hedges which succeed with maximal probability, given a capital constraint. Here we look for strategies which minimize the shortfall risk defined as the expectation of the shortfall weighted by some loss function. The resulting efficient hedges allow the investor to interpolate in a systematic way between the extremes of no hedge and a perfect (super-)hedge, depending on the accepted level of shortfall risk.

Sprache
Englisch

Erschienen in
Series: SFB 373 Discussion Paper ; No. 1999,18

Klassifikation
Wirtschaft
General Financial Markets: General (includes Measurement and Data)
Asset Pricing; Trading Volume; Bond Interest Rates
Contingent Pricing; Futures Pricing; option pricing
Criteria for Decision-Making under Risk and Uncertainty
Thema
risk management
stochastic volatility
shortfall risk
Hedging
efficient hedges
lower partial moments
convex duality

Ereignis
Geistige Schöpfung
(wer)
Föllmer, Hans
Leukert, Peter
Ereignis
Veröffentlichung
(wer)
Humboldt University of Berlin, Interdisciplinary Research Project 373: Quantification and Simulation of Economic Processes
(wo)
Berlin
(wann)
1999

Handle
URN
urn:nbn:de:kobv:11-10056108
Letzte Aktualisierung
10.03.2025, 11:44 MEZ

Datenpartner

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Objekttyp

  • Arbeitspapier

Beteiligte

  • Föllmer, Hans
  • Leukert, Peter
  • Humboldt University of Berlin, Interdisciplinary Research Project 373: Quantification and Simulation of Economic Processes

Entstanden

  • 1999

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