This file is part of IDEAS, which uses RePEc data


[ Papers | Articles | Software | Books | Chapters | Authors | Institutions | JEL Classification | NEP reports | Search | New papers by email | Author registration | Rankings | Volunteers | FAQ | Blog | Help! ]

Discrete time hedging errors for options with irregular payoffs

Author info | Abstract | Publisher info | Download info | Related research | Statistics
Author Info
Emmanuel Temam () (Université Paris VI - CERMICS, Ecole Nationale des Ponts et Chaussées, 6 et 8 avenue Blaise Pascal, 77455 Marne La Vallée, France Manuscript)
Emmanuel Gobet () (CMAP-Ecole Polytechnique, 91128 Palaiseau Cedex, France)
Abstract

In a complete market with a constant interest rate and a risky asset, which is a linear diffusion process, we are interested in the discrete time hedging of a European vanilla option with payoff function f. As regards the perfect continuous hedging, this discrete time strategy induces, for the trader, a risk which we analyze w.r.t. n, the number of discrete times of rebalancing. We prove that the rate of convergence of this risk (when $n \rightarrow + \infty$) strongly depends on the regularity properties of f: the results cover the cases of standard options.

Download Info
To download:

If you experience problems downloading a file, check if you have the proper application to view it first. Information about this may be contained in the File-Format links below. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://link.springer.de/link/service/journals/00780/papers/1005003/10050357.pdf
File Format: application/pdf
File Function:
Download Restriction: Access to the full text of the articles in this series is restricted

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Publisher Info
Article provided by Springer in its journal Finance and Stochastics.

Volume (Year): 5 (2001)
Issue (Month): 3 ()
Pages: 357-367
Download reference. The following formats are available: HTML (with abstract), plain text (with abstract), BibTeX, RIS (EndNote, RefMan, ProCite), ReDIF
Handle: RePEc:spr:finsto:v:5:y:2001:i:3:p:357-367

Note: received: July 1999; final version received: September 2000
Contact details of provider:
Web page: http://www.springerlink.com/content/101164/

Order Information:
Web: http://link.springer.de/orders.htm

For technical questions regarding this item, or to correct its listing, contact: (Christopher F Baum).

Related research
Keywords: Discrete time hedging; approximation of stochastic integral; rate of convergence.;

Find related papers by JEL classification:
G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
G12 - Financial Economics - - General Financial Markets - - - Asset Pricing
D4 - Microeconomics - - Market Structure and Pricing
C0 - Mathematical and Quantitative Methods - - General

Statistics
Access and download statistics

Did you know? Authors registered on the RePEc Author Service receive monthly emails with details about downloads and abstract views of their works.

This page was last updated on 2009-12-22.

This information is provided to you by IDEAS at the Department of Economics, College of Liberal Arts and Sciences, University of Connecticut using RePEc data on a server sponsored by the Society for Economic Dynamics.