Risk minimizing of derivatives via dynamic g-expectation and related topics
In this paper, we investigate risk minimization problem of derivatives based on non-tradable underlyings by means of dynamic g-expectations which are slight different from conditional g-expectations. In this framework, inspired by  and , we introduce risk indifference price, marginal risk price and derivative hedge and obtain their corresponding explicit expressions. The interesting thing is that their expressions have nothing to do with nonlinear generator g, and one deep reason for this is due to the completeness of financial market. By giving three useful special risk minimization problems, we obtain the explicit optimal strategies with initial wealth involved, demonstrate some qualitative analysis among optimal strategies, risk aversion parameter and market price of risk, together with some economic interpretations.
References listed on IDEAS
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- Rosazza Gianin, Emanuela, 2006. "Risk measures via g-expectations," Insurance: Mathematics and Economics, Elsevier, vol. 39(1), pages 19-34, August.
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- Jianming Xia, 2008. "Risk Aversion and Portfolio Selection in a Continuous-Time Model," Papers 0805.0618, arXiv.org, revised Dec 2011. Full references (including those not matched with items on IDEAS)
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