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A Comparison of Two Quadratic Approaches to Hedging in Incomplete Markets (1998)
| Content Provider | CiteSeerX |
|---|---|
| Author | Heath, David Platen, Eckhard Schweizer, Martin |
| Abstract | Abstract: This paper provides comparative theoretical and numerical results on risks, values and hedging strategies for local risk-minimization versus mean-variance hedging in a class of stochastic volatility models. We explain the theory for both hedging approaches in a general framework, specialize to a Markovian situation and analyze in detail variants of the well-known Heston (1993) and Stein/Stein (1991) stochastic volatility models. Numerical results are obtained mainly by PDE and simulation methods. In addition, we take special care to check that all our examples do satisfy the conditions required by the general theory. Key words: incomplete markets, hedging, option valuation, local risk-minimization, mean-variance hedging, stochastic volatility, PDE and simulation methods, Heston model |
| File Format | |
| Language | English |
| Publisher Date | 1998-01-01 |
| Access Restriction | Open |
| Subject Keyword | Incomplete Market Quadratic Approach Numerical Result Mean-variance Hedging Stochastic Volatility Model Simulation Method Local Risk-minimization Special Care General Framework General Theory Markovian Situation Detail Variant Heston Model Key Word Option Valuation Stein Stein Well-known Heston Stochastic Volatility |
| Content Type | Text |
| Resource Type | Technical Report |
