Risk-Minimizing Hedging for Stochastic Payment Styled Contingent Claims
Measuring financial risks with the conditional mean square error process of cost, we construct riskminimizing hedging model and study the dynamic hedging problem for stochastic payment styled contingent claims. For any given contingent claim with stochastic payment flow, we firstly prove that there is a unique risk-minimizing hedging strategy by taking advantage of the G-K-W decomposition theorem; then, with the Bellmans principle of optimality, explicit expressions of hedging strategies are acquired and these expressions only comprise conditional moments of risky assets price and stochastic payment; lastly, at the end of this paper, we take insurance payment for an example to illustrate the technique and conclusions mentioned in this paper are reasonable and feasible.
Hedging Risk-inininiizing Stochastic payment Dynamic programming
Jian-hua GUO Qing-xian XIAO
Business School,University of Shanghai for Science and Technology,Shanghai,China
国际会议
厦门
英文
1097-1101
2010-10-29(万方平台首次上网日期,不代表论文的发表时间)