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Title:A guided tour through quadratic hedging approaches PDF Logo
Authors:Schweizer, Martin
Issue Date: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.
locally risk-minimizing
mean-variance hedging
minimal martingale measure
variance-optimal martingale measure
Föllmer-Schweizer decomposition
quadratic hedging criteria
incomplete markets
Persistent Identifier of the first edition:urn:nbn:de:kobv:11-10047021
Document Type:Working Paper
Appears in Collections:Discussion Papers, SFB 373, HU Berlin

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