Artikel
Semistatic and sparse variance‐optimal hedging
We consider the problem of hedging a contingent claim with a “semistatic” strategy composed of a dynamic position in one asset and static (buy-and-hold) positions in other assets. We give general representations of the optimal strategy and the hedging error under the criterion of variance optimality and provide tractable formulas using Fourier integration in case of the Heston model. We also consider the problem of optimally selecting a sparse semistatic hedging strategy, i.e., a strategy that only uses a small subset of available hedging assets and discuss parallels to the variable-selection problem in linear regression. The methods developed are illustrated in an extended numerical example where we compute a sparse semistatic hedge for a variance swap using European options as static hedging assets.
- Language
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Englisch
- Bibliographic citation
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Journal: Mathematical Finance ; ISSN: 1467-9965 ; Volume: 30 ; Year: 2019 ; Issue: 2 ; Pages: 403-425 ; Hoboken, NJ: Wiley
- Event
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Geistige Schöpfung
- (who)
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Di Tella, Paolo
Haubold, Martin
Keller‐Ressel, Martin
- Event
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Veröffentlichung
- (who)
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Wiley
- (where)
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Hoboken, NJ
- (when)
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2019
- DOI
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doi:10.1111/mafi.12235
- Handle
- Last update
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10.03.2025, 11:43 AM CET
Data provider
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. If you have any questions about the object, please contact the data provider.
Object type
- Artikel
Associated
- Di Tella, Paolo
- Haubold, Martin
- Keller‐Ressel, Martin
- Wiley
Time of origin
- 2019
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