Hans FÃllmer () (Humboldt-UniversitÄt zu Berlin, Institut fØr Mathematik, Unter den Linden 6, D-10099 Berlin, Germany Manuscript) Peter Leukert () (Humboldt-UniversitÄt zu Berlin, Institut fØr Mathematik, Unter den Linden 6, D-10099 Berlin, Germany Manuscript)
Abstract
In a complete financial market every contingent claim can be hedged perfectly. In an incomplete market it is possible to stay on the safe side by superhedging. But such strategies may require a large amount of initial capital. Here we study the question what an investor can do who is unwilling to spend that much, and who is ready to use a hedging strategy which succeeds with high probability.
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Find related papers by JEL classification: G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data) G12 - Financial Economics - - General Financial Markets - - - Asset Pricing G13 - Financial Economics - - General Financial Markets - - - Contingent Pricing; Futures Pricing D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
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