Optimal Robust Mean-Variance Hedging in Incomplete Financial Markets

N. Lazrieva; T. Toronjadze

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arXiv · 0805.0122

Optimal Robust Mean-Variance Hedging in Incomplete Financial Markets

N. Lazrieva·T. Toronjadze

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Abstract

Optimal B-robust estimate is constructed for multidimensional parameter in drift coefficient of diffusion type process with small noise. Optimal mean-variance robust (optimal V -robust) trading strategy is find to hedge in mean-variance sense the contingent claim in incomplete financial market with arbitrary information structure and misspecified volatility of asset price, which is modelled by multidimensional continuous semimartingale. Obtained results are applied to stochastic volatility model, where the model of latent volatility process contains unknown multidimensional parameter in drift coefficient and small parameter in diffusion term.

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BibTeX RIS

N. Lazrieva, T. Toronjadze. 2008-05-01. Optimal Robust Mean-Variance Hedging in Incomplete Financial Markets. https://arxiv.org/abs/0805.0122

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