A new proposition on the martingale representation theorem and on the approximate hedging of contingent claim in mean-variance criterion

In this work we revisit the problem of the hedging of contingent claim using mean-square criterion. We prove that in incomplete market, some probability measure can be identified so that becomes -martingale under .This is in fact a new proposition on the martingale representation theorem. The new results also identify a weight function that serves to be an approximation to the Radon-Nikodým derivative of the unique neutral martingale measure.

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Year of publication:	2006-04
Authors:	Farber, André ; Nguyen, Van Huu ; Vuong, Quan Hoang
Institutions:	Centre Emile Bernheim, Solvay Brussels School of Economics and Management
Subject:	Martingale representation theorem \| Hedging \| Contingent claim \| Mean-variance

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Extent:	application/pdf
Series:	Working Papers CEB.
Type of publication:	Book / Working Paper
Notes:	Published by: Université Libre de Bruxelles, Solvay Business School, Centre Emile Bernheim (CEB) The text is part of a series Working papers CEB Number 06-004.RS 8 pages long
Classification:	G12 - Asset Pricing ; G13 - Contingent Pricing; Futures Pricing
Source:	RePEc - Research Papers in Economics

Persistent link: https://www.econbiz.de/10005738696