We study the pricing and hedging of derivatives in incomplete financial markets by considering the local risk-minimization method in the context of the benchmark approach, which will be called benchmarked local risk-minimization. We show that the proposed benchmarked local risk-minimization allows to handle un- der extremely weak assumptions a much richer modeling world than the classical methodology.

Local risk-minimization under the benchmark approach

CRETAROLA, Alessandra;
2014

Abstract

We study the pricing and hedging of derivatives in incomplete financial markets by considering the local risk-minimization method in the context of the benchmark approach, which will be called benchmarked local risk-minimization. We show that the proposed benchmarked local risk-minimization allows to handle un- der extremely weak assumptions a much richer modeling world than the classical methodology.
2014
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Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/11391/1190277
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