Minimal Variance Hedging of Options with Student-t Underlying

نویسنده

  • Klaus Pinn
چکیده

I explicitly work out closed form solutions for the optimal hedging strategies (in the sense of Bouchaud and Sornette) in the case of European call options, where the underlying is modeled by (unbiased) iid additive returns with Student-t distributions. The results may serve as illustrative examples for option pricing in the presence of fat tails.

برای دانلود رایگان متن کامل این مقاله و بیش از 32 میلیون مقاله دیگر ابتدا ثبت نام کنید

ثبت نام

اگر عضو سایت هستید لطفا وارد حساب کاربری خود شوید

منابع مشابه

Hedging strategies and minimal variance portfolios for European and exotic options in a Levy market

This paper presents hedging strategies for European and exotic options in a Lévy market. By applying Taylor's Theorem, dynamic hedging portfolios are constructed under different market assumptions, such as the existence of power jump assets or moment swaps. In the case of European options or baskets of European options, static hedging is implemented. It is shown that perfect hedging can be achi...

متن کامل

O ct 2 00 8 Hedging strategies and minimal variance portfolios for European and exotic options in a Lévy market

This paper presents hedging strategies for European and exotic options in a Lévy market. By applying Taylor's theorem, dynamic hedging portfolios are constructed under different market assumptions, such as the existence of power jump assets or moment swaps. In the case of European options or baskets of European options, static hedging is implemented. It is shown that perfect hedging can be achi...

متن کامل

M ay 2 00 8 Hedging strategies and minimal variance portfolios for European and exotic options in a Lévy market

This paper presents hedging strategies for European and exotic options in a Lévy market. By applying Taylor's theorem, dynamic hedging portfolios are constructed under different market assumptions, such as the existence of power jump assets or moment swaps. In the case of European options or baskets of European options, static hedging is implemented. It is shown that perfect hedging can be achi...

متن کامل

Hedging Basket Options by Using a Subset of Underlying Assets

The purpose of this paper is to investigate the use of Principal Component Analysis in finding the efficient subset of underlying assets for hedging European basket options. This asset selection technique can be used together with other hedging strategies to enhance the hedging performance. Meanwhile, it become practical and essential when some of the underlying assets are illiquid or even not ...

متن کامل

Hedging variance options on continuous semimartingales

We find robust model-free hedges and price bounds for options on the realized variance of [the returns on] an underlying price process. Assuming only that the underlying process is a positive continuous semimartingale, we superreplicate and subreplicate variance options and forward-starting variance options, by dynamically trading the underlying asset, and statically holding European options. W...

متن کامل

ذخیره در منابع من


  با ذخیره ی این منبع در منابع من، دسترسی به آن را برای استفاده های بعدی آسان تر کنید

عنوان ژورنال:

دوره   شماره 

صفحات  -

تاریخ انتشار 1999