Local Risk-Minimization under the Benchmark Approach
Pricing of Securities
2014-02-18 v1 Probability
Abstract
We study the pricing and hedging of derivatives in incomplete financial markets by considering the local risk-minimization method in the context of the benchmark approach, which will be called benchmarked local risk-minimization. We show that the proposed benchmarked local risk-minimization allows to handle under extremely weak assumptions a much richer modeling world than the classical methodology.
Keywords
Cite
@article{arxiv.1210.2337,
title = {Local Risk-Minimization under the Benchmark Approach},
author = {Francesca Biagini and Alessandra Cretarola and Eckhard Platen},
journal= {arXiv preprint arXiv:1210.2337},
year = {2014}
}