Quadratic Hedging for Contingent Claims under Delta Constraint
In this paper, under constraint of delta-strategy and by importing another related risky asset to compose a hedging portfolio comprising the underlying asset and riskless asset(the bond), firstly, we excellently devise a dynamic hedging program for contingent claims, and then, according to Principle of Dynamic Programming and by taking advantage of backward recursion technique, at each rebalance moment before options maturity date, the optimal hedging strategies are acquired to (1) eliminate the diffusion risk by imposing delta constraint; and (2) control the jump risk using the hedging portfolio, which minimize the mean squared error between the terminal valuation of hedging portfolio and the payment obligation that the option issuer may be charged with, lastly, at the end of this paper, empirical analysis and numerical results indicate that our proposed hedging strategy is not only efficacious and feasible but also convenient and simple to manipulate, especially, it is referential to hedging practice.
Contingent Claims Jump-Risk Control Delta-Constraint Dynamic Hedging Quadratic Criterion
GUO Jian-hua XIAO Qing-xian
Business School University of Shanghai for Science and Technology Shanghai, China
国际会议
2010 International Conference on Measurement and Control Engineering(2010年IEEE测量与控制工程国际会议 ICMCE2010)
成都
英文
465-469
2010-11-16（万方平台首次上网日期，不代表论文的发表时间）