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arXiv · 1902.11228

A numerical scheme for the quantile hedging problem

Cyril Bénézet·Jean-François Chassagneux·Christoph Reisinger
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Abstract

We consider the numerical approximation of the quantile hedging price in a non-linear market. In a Markovian framework, we propose a numerical method based on a Piecewise Constant Policy Timestepping (PCPT) scheme coupled with a monotone finite difference approximation. We prove the convergence of our algorithm combining BSDE arguments with the Barles & Jakobsen and Barles & Souganidis approaches for non-linear equations. In a numerical section, we illustrate the efficiency of our scheme by considering a financial example in a market with imperfections.

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Cyril Bénézet, Jean-François Chassagneux, Christoph Reisinger. 2019-02-28. A numerical scheme for the quantile hedging problem. https://doi.org/10.1137/19m1267477

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