On the Approximation of Random Variables by Stochastic Integrals with Respect to Semimartingales
AbstractIn this paper it is shown that the space of stochastic integrals w.r. to a special semimartingal is closed and hence every square integrable random variable admits a best approximation in this space. In terms of financial economics this means that for every contingent claim there exists a hedging strategy minimizing the expected square of net loss.
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Bibliographic InfoPaper provided by University of Bonn, Germany in its series Discussion Paper Serie B with number 277.
Date of creation: Nov 1994
Date of revision:
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Postal: Bonn Graduate School of Economics, University of Bonn, Adenauerallee 24 - 26, 53113 Bonn, Germany
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stochastic integration; hedging; incomplete markets;
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