Partial super-hedging of derivatives with model risk

Research output: Contribution to journalArticle

Abstract

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.

Original languageEnglish
Pages (from-to)811-831
Number of pages21
JournalJapan Journal of Industrial and Applied Mathematics
Volume34
Issue number3
DOIs
Publication statusPublished - Nov 1 2017

All Science Journal Classification (ASJC) codes

  • Engineering(all)
  • Applied Mathematics

Fingerprint Dive into the research topics of 'Partial super-hedging of derivatives with model risk'. Together they form a unique fingerprint.

  • Cite this