In this paper we discuss the tractability of stochastic volatility models for pricing and hedging options with the mean-variance hedging approach. We characterize the variance-optimal measure as the solution of an equation between Doléans exponentials; explicit examples include both models where volatility solves a diffusion equation and models where it follows a jump process. We further discuss the closedness of the space of strategies.
Biagini F, Guasoni P, Pratelli M (2000). Mean-variance hedging for stochastic volatility models. MATHEMATICAL FINANCE, 10(2), 109-123 [10.1111/1467-9965.00084].
Mean-variance hedging for stochastic volatility models
Guasoni PCo-primo
;
2000
Abstract
In this paper we discuss the tractability of stochastic volatility models for pricing and hedging options with the mean-variance hedging approach. We characterize the variance-optimal measure as the solution of an equation between Doléans exponentials; explicit examples include both models where volatility solves a diffusion equation and models where it follows a jump process. We further discuss the closedness of the space of strategies.File in questo prodotto:
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