Cooperative hedging with a higher interest rate for borrowing
Abstract
The paper studies the cooperative hedging problem of contingent claims in an incomplete financial market. Firstly we give the characterization of the optimal cooperative hedging strategy for the Black-Scholes model and the Volatility Jump model explicitly, then we consider the problem of cooperative hedging for the multi-agent case in a market with a higher borrowing interest rate. By the results of concave and linear backward stochastic differential equations, we give the optimal cooperative hedging strategy in our model.Download Info
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Bibliographic Info
Article provided by Elsevier in its journal Insurance: Mathematics and Economics.
Volume (Year): 42 (2008)
Issue (Month): 2 (April)
Pages: 609-616
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Web page: http://www.elsevier.com/locate/inca/505554
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- Ioannis Karatzas & Jaksa Cvitanic, 1999. "On dynamic measures of risk," Finance and Stochastics, Springer, vol. 3(4), pages 451-482.
- Jianming Xia, 2004. "Multi-agent investment in incomplete markets," Finance and Stochastics, Springer, vol. 8(2), pages 241-259, 05.
- N. El Karoui & S. Peng & M. C. Quenez, 1997. "Backward Stochastic Differential Equations in Finance," Mathematical Finance, Wiley Blackwell, vol. 7(1), pages 1-71.
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- Hans FÃllmer & Peter Leukert, 2000. "Efficient hedging: Cost versus shortfall risk," Finance and Stochastics, Springer, vol. 4(2), pages 117-146.
- Hans FÃllmer & Peter Leukert, 1999. "Quantile hedging," Finance and Stochastics, Springer, vol. 3(3), pages 251-273.
- Ioannis Karatzas & (*), S. G. Kou, 1998. "Hedging American contingent claims with constrained portfolios," Finance and Stochastics, Springer, vol. 2(3), pages 215-258.
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