Hulley, Hardy; McWalter, T. A. - Finance Discipline Group, Business School - 2008
markets, basis risk, local risk
minimization, mean-variance hedging.
This version: June 2008.
ySchool of Finance and Economics …
throughout. In particular, we discuss the two quadratic approaches of local
risk minimization and mean-variance hedging. Key to …, the PDE that emerges, for both local risk minimization and
mean-variance optimization, is the familiar Black-Scholes PDE …