Minimal Variance Hedging in Multi-Curve Interest Rate Modeling

We consider minimal variance hedging in a pure-jump multi-curve interest rate model. In the first part, we derive arithmetic multi-factor martingale representations for the spread, OIS and LIBOR rate which are bounded from below by a real-valued constant. In the second part, we investigate minimal variance hedging and provide a closed-form formula for the related minimal variance portfolio. We apply this result to several examples covering both replicable and non-replicable claims. We conclude the paper with a consideration of delta hedging