Dynamic programming and mean-variance hedging

Laurent, Jean Paul; Pham, Huyên

doi:10.1007/s007800050053

Cited by 137 publications

(111 citation statements)

References 21 publications

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“…The problem (1.1) was intensively investigated in last decade (see, e.g., Dufiie and Richardson [9], Schwezer [36], [37], [38], Delbaen et al [8], Monat and Striker [28], Rheinländer and Schweizer [33], (RSch hereafter), Pham et al [31], Gourieroux et al [11] (GLP hereafter), Laurent and Pham [18]). …”

Section: Introduction Motivation and Resultsmentioning

confidence: 99%

“…A stochastic volatility model, proposed by Hull and White [13] and Scott [39], where the stock price volatility is an random process, is a popular model of incomplete market, where the mean-variance hedging approach can be used (see, e.g., Laurent and Pham [18], Biagini et al [13], Mania and Tevzadze [24], Pham et al [31]). …”

Section: Introduction Motivation and Resultsmentioning

confidence: 99%

See 1 more Smart Citation

Optimal robust mean-variance hedging in incomplete financial markets

Lazrieva

Toronjadze

2008

J Math Sci

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Abstract. Optimal B-robust estimate is constructed for multidimensional parameter in drift coefficient of diffusion type process with small noise. Optimal mean-variance robust (optimal V -robust) trading strategy is find to hedge in mean-variance sense the contingent claim in incomplete financial market with arbitrary information structure and misspecified volatility of asset price, which is modelled by multidimensional continuous semimartingale. Obtained results are applied to stochastic volatility model, where the model of latent volatility process contains unknown multidimensional parameter in drift coefficient and small parameter in diffusion term.

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Section: Introduction Motivation and Resultsmentioning

confidence: 99%

Section: Introduction Motivation and Resultsmentioning

confidence: 99%

Optimal robust mean-variance hedging in incomplete financial markets

Lazrieva

Toronjadze

2008

J Math Sci

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“…The idea is to find the time-zero value of a portfolio which pays off at least as much as the contingent claim. One possibility is to formulate the problem as mean-variance hedging; see Duffie and Richardson (1991); Schweizer (1992Schweizer ( , 1995; Föllmer and Schweizer (1991); Gourieroux et al (1998); Laurent and Pham (1999); Schäl (1994)). Alternatively, the hedging can be performed using more general decision making tools and risk measures.…”

Section: Introductionmentioning

confidence: 99%

A Robust Approach to Hedging and Pricing in Imperfect Markets

Assa

Gospodinov

2017

Risks

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Abstract:This paper proposes a model-free approach to hedging and pricing in the presence of market imperfections such as market incompleteness and frictions. The generality of this framework allows us to conduct an in-depth theoretical analysis of hedging strategies with a wide family of risk measures and pricing rules, and study the conditions under which the hedging problem admits a solution and pricing is possible. The practical implications of our proposed theoretical approach are illustrated with an application on hedging economic risk.

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“…Lim [22] and Lim and Zhou [23], using backward stochastic differential equations, studied the problem under the assumption that the asset price process was continuous and driven by the Brownian motion. Using the convex duality and projection Theorem, Gourieroux [24], Laurent and Pham [25], and Schweizer [26] studied that under the assumption that the asset price process was continuous semi-martingale. However, the literatures on the asset price model with discontinuous processes are relatively few.…”

Section: Introductionmentioning

confidence: 99%