English

Efficient hedging in general Black-Scholes model

Pricing of Securities 2014-03-31 v2 Probability

Abstract

An investor faced with a contingent claim may eliminate risk by perfect hedging, but as it is often quite expensive, he seeks partial hedging (quantile hedging or efficient hedging) that requires less capital and reduces the risk. Efficient hedging for European call option was considered in the standard Black-Scholes model with constant drift and volatility coefficients. In this paper we considered the efficient hedging for European call option in general Black-Scholes model dXt=Xt(m(t)dt+σ(t)dw(t))dX_t=X_t(m(t)dt+\sigma (t)dw(t)) with time-varying drift and volatility coefficients and in fractional Black-Scholes model dXt=Xt(σBH(t)+mdt)dX_t=X_t(\sigma B_H(t)+mdt) with constant coefficients.

Keywords

Cite

@article{arxiv.1308.6387,
  title  = {Efficient hedging in general Black-Scholes model},
  author = {Kyong-Hui Kim and Myong-Guk Sin},
  journal= {arXiv preprint arXiv:1308.6387},
  year   = {2014}
}

Comments

8 pages

R2 v1 2026-06-22T01:17:10.448Z