Arbeitspapier
Efficient hedging for a complete jump-diffusion model
This paper is devoted to the problem of hedging contingent claims in the framework of a complete two-factor jump-diffusion model. In this context, it is well understood that every contingent claim can be hedged perfectly if one invests the unique arbitrage-free price. Based on the results of H. Föllmer and P. Leukert [4][ 5] in a general semimartingale setting, we determine the unique hedging strategies which minimize a suitably defined shortfall risk under a given cost constraint. We derive explicit formulas for this so-called efficient or quantile hedging strategy for a European call option. We then compare the performance of the optimal strategy for different degrees of the investor's risk-aversion.
- Sprache
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Englisch
- Erschienen in
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Series: SFB 373 Discussion Paper ; No. 2002,27
- Klassifikation
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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
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Efficient hedging
Quantile Hedging
jump-diffusion
martingale Measure
- Ereignis
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Geistige Schöpfung
- (wer)
-
Kirch, Michael
Krutchenko, R. N.
Melnikov, Aleksandr V.
- Ereignis
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Veröffentlichung
- (wer)
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Humboldt University of Berlin, Interdisciplinary Research Project 373: Quantification and Simulation of Economic Processes
- (wo)
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Berlin
- (wann)
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2002
- Handle
- URN
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urn:nbn:de:kobv:11-10048859
- Letzte Aktualisierung
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10.03.2025, 11:42 MEZ
Datenpartner
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Objekttyp
- Arbeitspapier
Beteiligte
- Kirch, Michael
- Krutchenko, R. N.
- Melnikov, Aleksandr V.
- Humboldt University of Berlin, Interdisciplinary Research Project 373: Quantification and Simulation of Economic Processes
Entstanden
- 2002