Local Risk-Minimization under the Benchmark Approach
AbstractWe study the pricing and hedging of derivatives in incomplete financial markets by considering the local risk-minimization method in the context of the benchmark approach, which will be called benchmarked local risk-minimization. We show that the proposed benchmarked local risk-minimization allows to handle under extremely weak assumptions a much richer modeling world than the classical methodology.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Quantitative Finance Research Centre, University of Technology, Sydney in its series Research Paper Series with number 319.
Date of creation: 01 Dec 2012
Date of revision:
Contact details of provider:
Postal: PO Box 123, Broadway, NSW 2007, Australia
Phone: +61 2 9514 7777
Fax: +61 2 9514 7711
Web page: http://www.business.uts.edu.au/qfrc/index.html
More information through EDIRC
local risk-minimization; Follmer-Schweizer decomposion; Galtchouck-Kunita-Watanabe decomposion; numeraire portfolio; benchmark approach; real world pricing; martingale representation;
Other versions of this item:
- Francesca Biagini & Alessandra Cretarola & Eckhard Platen, 2012. "Local Risk-Minimization under the Benchmark Approach," Papers 1210.2337, arXiv.org.
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Eckhard Platen, 2004.
"A Benchmark Approach to Finance,"
Research Paper Series
138, Quantitative Finance Research Centre, University of Technology, Sydney.
- Merton, Robert C, 1973. "An Intertemporal Capital Asset Pricing Model," Econometrica, Econometric Society, vol. 41(5), pages 867-87, September.
- Eckhard Platen, 2004.
"Diversified Portfolios with Jumps in a Benchmark Framework,"
Asia-Pacific Financial Markets,
Springer, vol. 11(1), pages 1-22, March.
- Eckhard Platen, 2004. "Diversified Portfolios with Jumps in a Benchmark Framework," Research Paper Series 129, Quantitative Finance Research Centre, University of Technology, Sydney.
- Ke Du & Eckhard Platen, 2011. "Three-Benchmarked Risk Minimization for Jump Diffusion Markets," Research Paper Series 296, Quantitative Finance Research Centre, University of Technology, Sydney.
- David Heath & Eckhard Platen & Martin Schweizer, 2001. "A Comparison of Two Quadratic Approaches to Hedging in Incomplete Markets," Mathematical Finance, Wiley Blackwell, vol. 11(4), pages 385-413.
- Hardy Hulley & Martin Schweizer, 2010. "M6 - On Minimal Market Models and Minimal Martingale Measures," Research Paper Series 280, Quantitative Finance Research Centre, University of Technology, Sydney.
- Claudia Ceci & Katia Colaneri & Alessandra Cretarola, 2013. "A Benchmark Approach to Risk-Minimization under Partial Information," Papers 1307.6036, arXiv.org.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Duncan Ford).
If references are entirely missing, you can add them using this form.