Discretization error of Stochastic Integrals
AbstractAsymptotic error distribution for approximation of a stochastic integral with respect to continuous semimartingale by Riemann sum with general stochastic partition is studied. Effective discretization schemes of which asymptotic conditional mean-squared error attains a lower bound are constructed. Two applications are given; efficient delta hedging strategies with transaction costs and effective discretization schemes for the Euler-Maruyama approximation are constructed.
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Bibliographic InfoPaper provided by arXiv.org in its series Papers with number 1004.2107.
Date of creation: Apr 2010
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- Takaki Hayashi & Per A. Mykland, 2005. "Evaluating Hedging Errors: An Asymptotic Approach," Mathematical Finance, Wiley Blackwell, Wiley Blackwell, vol. 15(2), pages 309-343.
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