A Comparison of Two Quadratic Approaches to Hedging in Incomplete Markets

Eckhard Platen · Walter Schachermayer B

132 citations0/0 files storedMathematical Finance

No readable copy stored yet — this record is metadata only.

No open-access location is known for this record yet.

Literature note Cite in a project Citation map

Stochastic processes and financial applications Financial Risk and Volatility Modeling Risk and Portfolio Optimization

Abstract

This paper provides comparative theoretical and numerical results on risks, values, and hedging strategies for local risk‐minimization versus mean‐variance hedging in a class of stochastic volatility models. We explain the theory for both hedging approaches in a general framework, specialize to a Markovian situation, and analyze in detail variants of the well‐known Heston (1993) and Stein and Stein (1991) stochastic volatility models. Numerical results are obtained mainly by PDE and simulation methods. In addition, we take special care to check that all of our examples do satisfy the conditions required by the general theory.

Paper brief

Loading…

Cite this work

Citation unavailable for this work.

BibTeX RIS CSL-JSON

No public copy is stored for this record, so only the metadata is cited.

Citations in this library

Citation map →

Stored only when both papers are in the corpus — 132 citations exist upstream.

References

1993A Closed-Form Solution for Options with Stochastic Volatility with Applications to Bond and Currency Options 1991Stock Price Distributions with Stochastic Volatility: An Analytic Approach 1990Hedging of contingent claims under incomplete information 2010A Guided Tour through Quadratic Hedging Approaches 1985Hedging of non-redundant contingent claims 1991Option hedging for semimartingales 1995On the minimal martingale measure and the möllmer-schweizer decomposition 1996Approximation pricing and the variance-optimal martingale measure

Cited by

2000Martingales versus PDEs in finance: an equivalence result with examples 2006Hedging guarantees in variable annuities under both equity and interest rate risks 2000Mean‐Variance Hedging for Stochastic Volatility Models 2004STOCHASTIC VOLATILITY MODELS, CORRELATION, AND THE q ‐OPTIMAL MEASURE 2007Robustly Hedging Variable Annuities With Guarantees Under Jump and Volatility Risks 2005

Explore the map →

Papers that cite the same references — the relational fallback while embeddings are still backfilling.

Imported from OpenAlex (CC0) — nothing here is generated.