Optimal hedging in discrete time
Pricing of Securities
2012-11-22 v1 Probability
Abstract
Building on the work of Schweizer (1995) and Cern and Kallseny (2007), we present discrete time formulas minimizing the mean square hedging error for multidimensional assets. In particular, we give explicit formulas when a regime-switching random walk or a GARCH-type process is utilized to model the returns. Monte Carlo simulations are used to compare the optimal and delta hedging methods.
Keywords
Cite
@article{arxiv.1211.5035,
title = {Optimal hedging in discrete time},
author = {Bruno Rémillard and Sylvain Rubenthaler},
journal= {arXiv preprint arXiv:1211.5035},
year = {2012}
}
Comments
Cette pr\'epublication appara\^it aussi sur SSRN et les cahiers du GERAD