×

A guided tour through quadratic hedging approaches. (English) Zbl 0992.91036

Jouini, E. (ed.) et al., Option pricing, interest rates and risk management. Cambridge: Cambridge University Press. Handbooks in Mathematical Finance. 538-574 (2001).
This is a broad exposition describing recent results and perspective of the development in the area of pricing and hedging options by using quadractic criteria. Two approaches are explained in detail, namely, a preference-free approach under incompleteness, and that one using surjective criteria according to which a dynamic trading strategy is chosen and option prices are computed. Special attention is paid to the case when the price process \(X\) is a local P-martingale. The possibility of a local risk-minimization in the general case are discussed, too. The latter method is compared with mean-variance hedging.
For the entire collection see [Zbl 0967.91001].

MSC:

91G20 Derivative securities (option pricing, hedging, etc.)
91-02 Research exposition (monographs, survey articles) pertaining to game theory, economics, and finance
60G99 Stochastic processes
91G80 Financial applications of other theories
PDFBibTeX XMLCite