A numerical scheme for the quantile hedging problem
Computational Finance
2021-02-17 v1 Computational Engineering, Finance, and Science
Numerical Analysis
Abstract
We consider the numerical approximation of the quantile hedging price in a non-linear market. In a Markovian framework, we propose a numerical method based on a Piecewise Constant Policy Timestepping (PCPT) scheme coupled with a monotone finite difference approximation. We prove the convergence of our algorithm combining BSDE arguments with the Barles & Jakobsen and Barles & Souganidis approaches for non-linear equations. In a numerical section, we illustrate the efficiency of our scheme by considering a financial example in a market with imperfections.
Keywords
Cite
@article{arxiv.1902.11228,
title = {A numerical scheme for the quantile hedging problem},
author = {Cyril Bénézet and Jean-François Chassagneux and Christoph Reisinger},
journal= {arXiv preprint arXiv:1902.11228},
year = {2021}
}
Comments
47 pages, 6 figures