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Three essays on pricing and hedging in incomplete markets
| Content Provider | Semantic Scholar |
|---|---|
| Author | Chen, Dan |
| Copyright Year | 2011 |
| Abstract | The thesis focuses on valuation and hedging problems when the market is incomplete. The Orst essay considers the quadratic hedging strategy. We propose a generalized quadratic hedging strategy which can balance a short-term risk (additional cost) with a long-term risk (hedging errors). The traditional quadratic hedging strategies, i.e. self-Onancing strategy and risk-minimization strategy, can be seen as special cases of the generalized quadratic hedging strategy. This is applied to the insurance derivatives market. The second essay compares parametric and nonparametric measure-changing techniques. The essay discusses three pricing approaches: pricing via Esscher measure, via calibration and via nonparametric risk-neutral density; and empirically compares the performance of the three approaches in the metal futures markets. The last essay establishes the concept of stochastic volatility of volatility and proposes several estimation methods. |
| File Format | PDF HTM / HTML |
| Alternate Webpage(s) | http://etheses.lse.ac.uk/152/1/Chen_three_essays_on_pricing_hedging_in_incomplete_markets.pdf |
| Language | English |
| Access Restriction | Open |
| Content Type | Text |
| Resource Type | Article |
