Risk-minimizing hedging strategies under restricted information: The case of stochastic volatility models observable only at discrete random times

We consider a market where the price of the risky asset follows a stochastic volatility model, but can be observed only at discrete random time points. We determine a local risk minimizing hedging strategy, assuming that the information of the agent is restricted to the observations of the price at its random jump times. Stochastic filtering also comes into play when computing the hedging strategy in the given situation of restricted information. Copyright Springer-Verlag Berlin Heidelberg 1999