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A Note on Mean-Variance Hedging of Non-Attainable Claims

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  • Kohlmann, Michael
  • Peisl, Bernhard

Abstract

A market is described by two correlated asset prices. But only one of them is traded while the contingent claim is a function of both assets. We solve the mean-variance hedging prob- lem completely and prove that the optimal strategy consists of a modified pure hedge expressible in terms of the obervation process and a Merton-type investment.

Suggested Citation

  • Kohlmann, Michael & Peisl, Bernhard, 2000. "A Note on Mean-Variance Hedging of Non-Attainable Claims," CoFE Discussion Papers 00/06, University of Konstanz, Center of Finance and Econometrics (CoFE).
    • Handle: RePEc:zbw:cofedp:0006
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    Cited by:

    1. Delong, Lukasz, 2010. "An optimal investment strategy for a stream of liabilities generated by a step process in a financial market driven by a Lévy process," Insurance: Mathematics and Economics, Elsevier, vol. 47(3), pages 278-293, December.

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