Local Risk-Minimization under the Benchmark Approach
We 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.
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| Length: | 34 pages |
| Date of creation: | 01 Dec 2012 |
| Publication status: | Published as: Biagini, F., Cretarola, A. and Platen, E., 2014, "Local Risk-Minimization under the Benchmark Approach", Mathematics and Financial Economics, 8(2), 109-134. |
| Handle: | RePEc:uts:rpaper:319 |
| 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.qfrc.uts.edu.au/ More information through EDIRC
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References listed on IDEAS
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, 2006.
"A Benchmark Approach To Finance,"
Mathematical Finance,
Wiley Blackwell, vol. 16(1), pages 131-151.
- 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 867-887, September.
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- 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.
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- Eckhard Platen, 2004. "Diversified Portfolios with Jumps in a Benchmark Framework," Asia-Pacific Financial Markets, Springer;Japanese Association of Financial Economics and Engineering, 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. Full references (including those not matched with items on IDEAS)