Hedging of defaultable claims in a structural model using a locally risk-minimizing approach
Mathematical Finance
2015-05-14 v1
Abstract
In the context of a locally risk-minimizing approach, the problem of hedging defaultable claims and their Follmer-Schweizer decompositions are discussed in a structural model. This is done when the underlying process is a finite variation Levy process and the claims pay a predetermined payout at maturity, contingent on no prior default. More precisely, in this particular framework, the locally risk-minimizing approach is carried out when the underlying process has jumps, the derivative is linked to a default event, and the probability measure is not necessarily risk-neutral.
Cite
@article{arxiv.1505.03501,
title = {Hedging of defaultable claims in a structural model using a locally risk-minimizing approach},
author = {Ramin Okhrati and Alejandro Balbás and José Garrido},
journal= {arXiv preprint arXiv:1505.03501},
year = {2015}
}