Variance-Optimal Hedging for Time-Changed Levy Processes
In this article, we solve the variance-optimal hedging problem in stochastic volatility (SV) models based on time-changed Levy processes, that is, in the setup of Carr et al. (2003). The solution is derived using results for general affine models in the companion article [Kallsen and Pauwels (2009)].
Volume (Year): 18 (2011)
Issue (Month): 1 ()
|Contact details of provider:|| Web page: http://www.tandfonline.com/RAMF20|
|Order Information:||Web: http://www.tandfonline.com/pricing/journal/RAMF20|
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.:
- Helyette Geman & P. Carr & D. Madan & M. Yor, 2003. "Stochastic Volatility for Levy Processes," Post-Print halshs-00144385, HAL.
- Friedrich Hubalek & Jan Kallsen & Leszek Krawczyk, 2006. "Variance-optimal hedging for processes with stationary independent increments," Papers math/0607112, arXiv.org.
- Bates, David S, 1996. "Jumps and Stochastic Volatility: Exchange Rate Processes Implicit in Deutsche Mark Options," Review of Financial Studies, Society for Financial Studies, vol. 9(1), pages 69-107.
- Friedrich Hubalek & Carlo Sgarra, 2007. "Quadratic Hedging For The Bates Model," International Journal of Theoretical and Applied Finance (IJTAF), World Scientific Publishing Co. Pte. Ltd., vol. 10(05), pages 873-885.
- repec:dau:papers:123456789/1392 is not listed on IDEAS
- 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.
- Ales Černý & Jan Kallsen, 2008. "Mean-Variance Hedging And Optimal Investment In Heston'S Model With Correlation," Mathematical Finance, Wiley Blackwell, vol. 18(3), pages 473-492.
- Flavio Angelini & Stefano Herzel, 2007. "Measuring the error of dynamic hedging: a Laplace transform approach," Quaderni del Dipartimento di Economia, Finanza e Statistica 33/2007, Università di Perugia, Dipartimento Economia.
- Jan Kallsen & Richard Vierthauer, 2009. "Quadratic hedging in affine stochastic volatility models," Review of Derivatives Research, Springer, vol. 12(1), pages 3-27, April.
When requesting a correction, please mention this item's handle: RePEc:taf:apmtfi:v:18:y:2011:i:1:p:1-28. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Michael McNulty)
If references are entirely missing, you can add them using this form.