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The efficient hedging problem for American options

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  • Sabrina Mulinacci

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  • Sabrina Mulinacci, 2011. "The efficient hedging problem for American options," Finance and Stochastics, Springer, vol. 15(2), pages 365-397, June.
    • Handle: RePEc:spr:finsto:v:15:y:2011:i:2:p:365-397
    DOI: 10.1007/s00780-010-0151-7
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    References listed on IDEAS

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    1. Ioannis Karatzas & Jaksa Cvitanic, 1999. "On dynamic measures of risk," Finance and Stochastics, Springer, vol. 3(4), pages 451-482.
    2. Leonel Perez-hernandez, 2007. "On the existence of an efficient hedge for an American contingent claim within a discrete time market," Quantitative Finance, Taylor & Francis Journals, vol. 7(5), pages 547-551.
    3. Rüdiger Frey & Wolfgang J. Runggaldier, 1999. "Risk-minimizing hedging strategies under restricted information: The case of stochastic volatility models observable only at discrete random times," Mathematical Methods of Operations Research, Springer;Gesellschaft für Operations Research (GOR);Nederlands Genootschap voor Besliskunde (NGB), vol. 50(2), pages 339-350, October.
    4. H. Föllmer & Y.M. Kabanov, 1997. "Optional decomposition and Lagrange multipliers," Finance and Stochastics, Springer, vol. 2(1), pages 69-81.
    5. Nakano, Yumiharu, 2004. "Minimization of shortfall risk in a jump-diffusion model," Statistics & Probability Letters, Elsevier, vol. 67(1), pages 87-95, March.
    6. Hans FÃllmer & Peter Leukert, 2000. "Efficient hedging: Cost versus shortfall risk," Finance and Stochastics, Springer, vol. 4(2), pages 117-146.
    7. Yan Dolinsky, 2010. "Shortfall Risk Approximations for American Options in the multidimensional Black--Scholes Model," Papers 1004.1574, arXiv.org.
    8. Paolo Guasoni, 2002. "Risk minimization under transaction costs," Finance and Stochastics, Springer, vol. 6(1), pages 91-113.
    9. Yan Dolinsky & Yuri Kifer, 2008. "Binomial approximations of shortfall risk for game options," Papers 0811.1896, arXiv.org.
    10. Yumiharu Nakano, 2003. "Minimizing coherent risk measures of shortfall in discrete-time models with cone constraints," Applied Mathematical Finance, Taylor & Francis Journals, vol. 10(2), pages 163-181.
    11. Marco Schulmerich & Siegfried Trautmann, 2003. "Local Expected Shortfall-Hedging in Discrete Time," Review of Finance, European Finance Association, vol. 7(1), pages 75-102.
    12. 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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    Citations

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    Cited by:

    1. Peter Lindberg, 2012. "Optimal partial hedging of an American option: shifting the focus to the expiration date," Mathematical Methods of Operations Research, Springer;Gesellschaft für Operations Research (GOR);Nederlands Genootschap voor Besliskunde (NGB), vol. 75(3), pages 221-243, June.
    2. Erhan Bayraktar & Yan Dolinsky & Jia Guo, 2018. "Continuity of Utility Maximization under Weak Convergence," Papers 1811.01420, arXiv.org, revised Jun 2020.
    3. Roxana Dumitrescu & Romuald Elie & Wissal Sabbagh & Chao Zhou, 2017. "A new Mertens decomposition of $\mathscr{Y}^{g,\xi}$-submartingale systems. Application to BSDEs with weak constraints at stopping times," Papers 1708.05957, arXiv.org, revised May 2023.

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    More about this item

    Keywords

    American options; Convex risk functionals; Fatou convergence; Worst stopping; Expected shortfall; 91B28; 90C39; 60H05; G13; G11;
    All these keywords.

    JEL classification:

    • G13 - Financial Economics - - General Financial Markets - - - Contingent Pricing; Futures Pricing
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions

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