For a large class of vanilla contingent claims, we establish an explicit Föllmer-Schweizer decomposition when the underlying is a process with independent increments (PII) and an exponential of a PII process. This allows to provide an efficient algorithm for solving the mean variance hedging problem. Applications to models derived from the electricity market are performed.

Variance Optimal Hedging in incomplete market for processes with independent increments and applications to electricity market / Goutte, Stéphane. - (2010 Jul 05).

Variance Optimal Hedging in incomplete market for processes with independent increments and applications to electricity market

2010

Abstract

For a large class of vanilla contingent claims, we establish an explicit Föllmer-Schweizer decomposition when the underlying is a process with independent increments (PII) and an exponential of a PII process. This allows to provide an efficient algorithm for solving the mean variance hedging problem. Applications to models derived from the electricity market are performed.
Variance-optimal hedging, Föllmer-Schweizer decomposition, Lévy process, Cumulative generating function, Characteristic function, Normal Inverse Gaussian process, Electricity markets, Process with independent increments.
Variance Optimal Hedging in incomplete market for processes with independent increments and applications to electricity market / Goutte, Stéphane. - (2010 Jul 05).
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Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/11385/200842
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