Comparison of Some Key Approches to Hedging in Incomplete Markets
The paper provides a numerical comparison of local risk minimisation and mean-variance hedging for some key variations of stochastic volatility models. A hedging and pricing framework is established for both approaches. Important quantitative differences become apparent that have implications for the implementation of hedging strategies under stochastic volatility.
Year of publication: |
1998-12-01
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Authors: | Heath, David ; Platen, Eckhard ; Schweizer, M. |
Institutions: | Finance Discipline Group, Business School |
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