Weak Convergence of Hedging Strategies of Contingent Claims
This paper presents results on the convergence for hedging strategies in the setting of incomplete financial markets. We examine the convergence of the so-called locally risk-minimizing strategy. It is proved that such a choice for the trading strategy, when perfect hedging of contingent claims is infeasible, is robust under weak convergence. Several fundamental examples, such as trinomial trees and stochastic volatility models, extracted from the financial modeling literature illustrate this property for both deterministic and random time intervals shrinking to zero.
|Date of creation:||Jan 2002|
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- 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.
- O. Scaillet & J.-L. Prigent & J.-P. Lesne, 2000.
"Convergence of discrete time option pricing models under stochastic interest rates,"
Finance and Stochastics,
Springer, vol. 4(1), pages 81-93.
- Jean-Philippe Lesne & Jean-Luc Prigent & Olivier Scaillet, 1998. "Convergence of Discrete Time Option Pricing Models Under Stochastic Interest Rates," Working Papers 98-51, Centre de Recherche en Economie et Statistique.
- Jean -Luc Prigent & Olivier Renault & Olivier Scaillet, 1999. "An Autoregressive Conditional Binomial Option Pricing Model," Working Papers 99-65, Centre de Recherche en Economie et Statistique.
- Olivier Renault & Jean-Luc Prigent & Olivier Scaillet, 2000. "An Autoregressive Conditional Binomial Option Pricing Model," FMG Discussion Papers dp364, Financial Markets Group.
- Prigent, Jean-Luc & Renault, Olivier & Scaillet, Olivier, 2004. "Option pricing with discrete rebalancing," Journal of Empirical Finance, Elsevier, vol. 11(1), pages 133-161, January.
- Jean -Luc Prigent & Olivier Renault & Olivier Scaillet, 1999. "Option Pricing with Discrete Rebalancing," Working Papers 99-61, Centre de Recherche en Economie et Statistique.
- Jean-Luc PRIGENT & Olivier RENAULT & Olivier SCAILLET, 2002. "Option Pricing with Discrete Rebalancing," FAME Research Paper Series rp55, International Center for Financial Asset Management and Engineering.
- Prigent, J.-L. & Renault, O. & Scaillet, O., 1999. "Option Pricing with Discrete Rebalancing," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) 1999029, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES), revised 00 Oct 1999.
- J.L. Prigent & O. Renault & O. Scaillet., 1999. "Option pricing with discrete rebalancing," THEMA Working Papers 99-41, THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise.
- Duffie, Darrell & Lando, David, 2001. "Term Structures of Credit Spreads with Incomplete Accounting Information," Econometrica, Econometric Society, vol. 69(3), pages 633-664, May.
- Runggaldier, Wolfgang J. & Martin Schweizer, 1995. "Convergence of Option Values under Incompleteness," Discussion Paper Serie B 333, University of Bonn, Germany.
- repec:crs:wpaper:9961 is not listed on IDEAS
- Hull, John C & White, Alan D, 1987. " The Pricing of Options on Assets with Stochastic Volatilities," Journal of Finance, American Finance Association, vol. 42(2), pages 281-300, June.
- Schweizer, Martin, 1992. "Martingale densities for general asset prices," Journal of Mathematical Economics, Elsevier, vol. 21(4), pages 363-378.
- Schweizer, Martin, 1991. "Option hedging for semimartingales," Stochastic Processes and their Applications, Elsevier, vol. 37(2), pages 339-363, April. Full references (including those not matched with items on IDEAS)
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