In this paper, we prove the existence of efficient partial hedging strategies for a trader unable to commit the initial minimal amount of money needed to implement a hedging strategy for an American option. The attitude towards the shortfall is modeled in terms of a decreasing and convex risk functional satisfying a lower semi-continuity property with respect to the Fatou convergence of stochastic processes. Some relevant examples of risk functionals are analyzed. Numerical computations in a discrete-time market model are provided. In a Lévy market, an approximating solution is given assuming discrete-time trading.
S. Mulinacci (2011). The efficient hedging problem for American options. FINANCE AND STOCHASTICS, 15(2), 365-397 [10.1007/s00780-010-0151-7].
The efficient hedging problem for American options
MULINACCI, SABRINA
2011
Abstract
In this paper, we prove the existence of efficient partial hedging strategies for a trader unable to commit the initial minimal amount of money needed to implement a hedging strategy for an American option. The attitude towards the shortfall is modeled in terms of a decreasing and convex risk functional satisfying a lower semi-continuity property with respect to the Fatou convergence of stochastic processes. Some relevant examples of risk functionals are analyzed. Numerical computations in a discrete-time market model are provided. In a Lévy market, an approximating solution is given assuming discrete-time trading.I documenti in IRIS sono protetti da copyright e tutti i diritti sono riservati, salvo diversa indicazione.
