A benchmark approach to risk-minimization under partial information

The goal of this paper is to investigate (locally) risk-minimizing hedging strategies under the benchmark approach in a financial semimartingale market model where there are restrictions on the available information. More precisely, we characterize the optimal strategy as the integrand appearing in the Galtchouk–Kunita–Watanabe decomposition of the benchmarked contingent claim under partial information and provide its description in terms of the integrand in the classical Galtchouk–Kunita–Watanabe decomposition under full information via dual predictable projections. Finally we show how these results can be applied to unit-linked life insurance contracts.