Robustness of quadratic hedging strategies in finance via Fourier transforms
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摘要
In this paper we investigate the consequences of the choice of the model to partial hedging in incomplete markets in finance. In fact we consider two models for the stock price process. The first model is a geometric Lévy process in which the small jumps might have infinite activity. The second model is a geometric Lévy process where the small jumps are truncated or replaced by a Brownian motion which is appropriately scaled. To prove the robustness of the quadratic hedging strategies we use pricing and hedging formulas based on Fourier transform techniques. We compute convergence rates and motivate the applicability of our results with examples.
论文关键词:Lévy processes,Options,Quadratic hedging,Fourier transforms,Robustness
论文评审过程:Received 26 September 2014, Revised 16 July 2015, Available online 25 September 2015, Version of Record 8 October 2015.
论文官网地址:https://doi.org/10.1016/j.cam.2015.09.005