TY - JOUR
T1 - Partial super-hedging of derivatives with model risk
AU - Matsumoto, Koichi
N1 - Funding Information:
I wish to thank Prof. Shigeo Kusuoka for helpful discussions and comments. I also thank the anonymous referee for useful comments. This research was supported by JSPS KAKENHI Grant numbers 23740080 and 15K03544.
PY - 2017/11/1
Y1 - 2017/11/1
N2 - This paper studies a hedging problem in the market where an investor can observe a risky asset price process but he does not know true parameters of this process. The investor is assumed to hedge derivatives on the risky asset by a partial super-hedging strategy in order to cut the hedging cost. We show two partial differential equations which play an important role to solve the optimal hedging cost and an optimal strategy. Further we analyze the optimal hedging cost numerically by trinomial models.
AB - This paper studies a hedging problem in the market where an investor can observe a risky asset price process but he does not know true parameters of this process. The investor is assumed to hedge derivatives on the risky asset by a partial super-hedging strategy in order to cut the hedging cost. We show two partial differential equations which play an important role to solve the optimal hedging cost and an optimal strategy. Further we analyze the optimal hedging cost numerically by trinomial models.
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U2 - 10.1007/s13160-017-0267-7
DO - 10.1007/s13160-017-0267-7
M3 - Article
AN - SCOPUS:85028962009
SN - 0916-7005
VL - 34
SP - 811
EP - 831
JO - Japan Journal of Industrial and Applied Mathematics
JF - Japan Journal of Industrial and Applied Mathematics
IS - 3
ER -