OPTIMAL HEDGING IN DISCRETE TIME - Université Côte d'Azur
Journal Articles Quantitative Finance Year : 2013

OPTIMAL HEDGING IN DISCRETE TIME

Abstract

Building on the work of Schweizer (1995) and Cern and Kallseny (2007), we present discrete time formulas minimizing the mean square hedging error for multidimensional assets. In particular, we give explicit formulas when a regime-switching random walk or a GARCH-type process is utilized to model the returns. Monte Carlo simulations are used to compare the optimal and delta hedging methods.
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Dates and versions

hal-00755339 , version 1 (21-11-2012)

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Bruno Rémillard, Sylvain Rubenthaler. OPTIMAL HEDGING IN DISCRETE TIME. Quantitative Finance, 2013, 13 (6), pp.819-825. ⟨hal-00755339⟩
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