Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/61765
Authors: 
Schweizer, Martin
Year of Publication: 
1999
Series/Report no.: 
Discussion Papers, Interdisciplinary Research Project 373: Quantification and Simulation of Economic Processes 1999,96
Abstract: 
This paper gives an overview of results and developments in the area of pricing and hedging contingent claims in an incomplete market by means of a quadratic criterion. We first present the approach of risk-minimization in the case where the underlying discounted price process X is a local martingale. We then discuss the extension to local risk-minimization when X is a semimartingale and explain the relations to the Föllmer-Schweizer decomposition and the minimal martingale measure. Finally we study mean-variance hedging, the variance-optimal martingale measure and the connections to closeness properties of spaces of stochastic integrals.
Subjects: 
risk-minimization
locally risk-minimizing
mean-variance hedging
minimal martingale measure
variance-optimal martingale measure
Föllmer-Schweizer decomposition
quadratic hedging criteria
incomplete markets
JEL: 
G10
C60
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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