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An extension of mean-variance hedging to the discontinuous case

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  • Takuji Arai

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    Abstract

    Our goal in this paper is to give a representation of the mean-variance hedging strategy for models whose asset price process is discontinuous as an extension of Gouriéroux, Laurent and Pham (1998) and Rheinländer and Schweizer (1997). However, we have to impose some additional assumptions related to the variance-optimal martingale measure. Copyright Springer-Verlag Berlin/Heidelberg 2005

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    File URL: http://hdl.handle.net/10.1007/s00780-004-0136-5
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    Bibliographic Info

    Article provided by Springer in its journal Finance and Stochastics.

    Volume (Year): 9 (2005)
    Issue (Month): 1 (January)
    Pages: 129-139

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    Handle: RePEc:spr:finsto:v:9:y:2005:i:1:p:129-139

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    Related research

    Keywords: Mean-variance hedging; incomplete market; variance-optimal martingale measure; reverse Hölder inequality;

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    Cited by:
    1. Koichi Matsumoto, 2009. "Dynamic programming and mean-variance hedging with partial execution risk," Review of Derivatives Research, Springer, vol. 12(1), pages 29-53, April.
    2. Stephane Goutte & Armand Ngoupeyou, 2012. "Optimization problem and mean variance hedging on defaultable claims," Papers 1209.5953, arXiv.org.
    3. Arai, Takuji, 2005. "Some properties of the variance-optimal martingale measure for discontinuous semimartingales," Statistics & Probability Letters, Elsevier, vol. 74(2), pages 163-170, September.
    4. Jianming Xia, 2006. "Mean-variance Hedging in the Discontinuous Case," Papers math/0607775, arXiv.org.
    5. St\'ephane Goutte & Nadia Oudjane & Francesco Russo, 2013. "Variance optimal hedging for continuous time additive processes and applications," Papers 1302.1965, arXiv.org.
    6. Ale\v{s} \v{C}ern\'y & Jan Kallsen, 2007. "On the structure of general mean-variance hedging strategies," Papers 0708.1715, arXiv.org.
    7. St\'ephane Goutte & Nadia Oudjane & Francesco Russo, 2009. "Variance Optimal Hedging for continuous time processes with independent increments and applications," Papers 0912.0372, arXiv.org.

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