A new proposition on the martingale representation theorem and on the approximate hedging of contingent claim in mean-variance criterion
AbstractIn 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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Bibliographic InfoPaper provided by ULB -- Universite Libre de Bruxelles in its series Working Papers CEB with number 06-004.RS.
Length: 8 p.
Date of creation: Apr 2006
Date of revision:
Publication status: Published by: Université Libre de Bruxelles, Solvay Business School, Centre Emile Bernheim (CEB)
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Martingale representation theorem; Hedging; Contingent claim; Mean-variance.;
Find related papers by JEL classification:
- G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
- G13 - Financial Economics - - General Financial Markets - - - Contingent Pricing; Futures Pricing
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