Takuji Arai: An explicit representation of locally risk-minimizing hedging strategy for Levy markets

Takuji Arai, Uni. Keio, holder et seminar med tittelen: An explicit representation of locally risk-minimizing hedging strategy for Levy markets

 

We consider locally risk-minimization problem when risky asset price processis described by an SDE driven by a Levy process. Our goal is to obtain an explicit representation formula for the locally risk-minimizing hedging strategy for Levy markets by using Malliavin calculus for Levy processes. Firstly, we introduce a Clark-Ocone type formula for Levy process under a change of measure. Then, we obtain an explicit representation of the Follmer-Schweizer decomposition. Moreover, we calculate Malliavin derivatives for Eupopean call options by an approximation method. Some examples including CGMY model are also discussed.
 
(joint work with Ryoichi Suzuki (Keio University))
Published June 12, 2015 1:22 PM - Last modified June 12, 2015 1:22 PM