Variance Optimal Hedging for continuous time processes with independent increments and applications
Computational Finance
2009-12-03 v1 Probability
Pricing of Securities
Abstract
For a large class of vanilla contingent claims, we establish an explicit F\"ollmer-Schweizer decomposition when the underlying is a process with independent increments (PII) and an exponential of a PII process. This allows to provide an efficient algorithm for solving the mean variance hedging problem. Applications to models derived from the electricity market are performed.
Keywords
Cite
@article{arxiv.0912.0372,
title = {Variance Optimal Hedging for continuous time processes with independent increments and applications},
author = {Stéphane Goutte and Nadia Oudjane and Francesco Russo},
journal= {arXiv preprint arXiv:0912.0372},
year = {2009}
}