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
Englisch

Erschienen in
Series: SFB 373 Discussion Paper ; No. 2002,27

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
Efficient hedging
Quantile Hedging
jump-diffusion
martingale Measure

Ereignis
Geistige Schöpfung
(wer)
Kirch, Michael
Krutchenko, R. N.
Melnikov, Aleksandr V.
Ereignis
Veröffentlichung
(wer)
Humboldt University of Berlin, Interdisciplinary Research Project 373: Quantification and Simulation of Economic Processes
(wo)
Berlin
(wann)
2002

Handle
URN
urn:nbn:de:kobv:11-10048859
Letzte Aktualisierung
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

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