Ffr Angewandte Analysis Und Stochastik Numerical Construction of a Hedging Strategy against the Multi-asset European Claim

For evaluating a hedging strategy we h a ve t o k n o w a t e v ery instant the solution of the Cauchy problem for a parabolic equation (the value of the hedging portfolio) and its derivatives (the deltas). We suggest to nd these magnitudes by Monte Carlo simulation of the corresponding system of stochastic diierential equations using weak solution schemes. It turns out that with one and the same control function a variance reduction can be achieved simultaneously for the claim value as well as for the deltas. We consider asset models with an instantaneous saving bond and the Jamshidian LIBOR rate model.