Local Risk-Minimization under the Benchmark Approach

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 under extremely weak assumptions a much richer modeling world than the classical methodology.

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Year of publication:	2012-12-01
Authors:	Biagini, Francesca ; Cretarola, Alessandra ; Platen, Eckhard
Institutions:	Finance Discipline Group, Business School
Subject:	local risk-minimization \| Follmer-Schweizer decomposion \| Galtchouck-Kunita-Watanabe decomposion \| numeraire portfolio \| benchmark approach \| real world pricing \| martingale representation

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Extent:	application/pdf
Series:	Research Paper Series.
Type of publication:	Book / Working Paper
Notes:	Number 319 3 pages long
Source:	RePEc - Research Papers in Economics

Persistent link: https://ebvufind01.dmz1.zbw.eu/10010617688