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arXiv · 0912.0372

Variance Optimal Hedging for continuous time processes with independent increments and applications

Stéphane Goutte·Nadia Oudjane·Francesco Russo
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Abstract

For a large class of vanilla contingent claims, we establish an explicit Föllmer-Schweizer decomposition when the underlying is a process with independent increments (PII) and an exponential of a PII process. This allows to provide an efficient algorithm for solving the mean variance hedging problem. Applications to models derived from the electricity market are performed.

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Stéphane Goutte, Nadia Oudjane, Francesco Russo. 2009-12-02. Variance Optimal Hedging for continuous time processes with independent increments and applications. https://arxiv.org/abs/0912.0372

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