André Farber () (Centre Emile Bernheim, Solvay Business School, Université Libre de Bruxelles, Brussels.) Van Huu Nguyen (Vietnam National University, Hanoi, Vietnam.) Quan Hoang Vuong () (Centre Emile Bernheim, Solvay Business School, Université Libre de Bruxelles, Brussels.)
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In this work we revisit the problem of the hedging of contingent claim using mean-square criterion. We prove that in incomplete market, some probability measure can be identified so that becomes -martingale under . This is in fact a new proposition on the martingale representation theorem. The new results also identify a weight function that serves to be an approximation to the Radon-Nikodým derivative of the unique neutral martingale measure.
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Paper provided by Université Libre de Bruxelles, Solvay Brussels School of Economics and Management, Centre Emile Bernheim (CEB) in its series Working Papers CEB with number
06-004.RS.