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Local risk-minimization under transaction costs

Lamberton, Damien; Pham, Huyên; Schweizer, Martin - 1998

We propose a new approach to the pricing and hedging of contingent claims under transaction costs in a general incomplete market in discrete time. Under the assumptions of a bounded mean-variance tradeoff, substantial risk and a nondegeneracy condition on the conditional variances of asset...

Persistent link: https://www.econbiz.de/10009576212

Existence and structure of stochastic equilibria with intertemporal substitution

Bank, Peter; Riedel, Frank - 2000

We prove existence of an Arrow-Debreu equilibrium when agents' preferences exhibit local substitution in the sense of Hindy, Huang, and Kreps (1992). Efficient allocations and supporting price functionals are identified and characterized. Under Hindy Huang Kreps preferences, equilibrium price...

Persistent link: https://www.econbiz.de/10009612019

Arrow-Debreu equilibria with asymptotically heterogeneous expectations exist

Riedel, Frank - 2001

In infinite horizon economies only local equivalence of beliefs is needed to ensure the existence of an Arrow-Debreu equilibrium. In fact, agents can even disagree completely in the long run in the sense that asymptotically, their beliefs are singular. -- Heterogeneous expectations ;...

Persistent link: https://www.econbiz.de/10009613607

Quantifying the value of initial investment information

Amendinger, Jürgen; Becherer, Dirk; Schweizer, Martin - 2000

of independent interest, namely a martingale preserving change of measure and a martingale representation theorem for … initially enlarged filtrations. -- utility maximization ; value of information ; initial enlargement of filtrations ; Martingale …

Persistent link: https://www.econbiz.de/10009583881

Quantile hedging

Föllmer, Hans; Leukert, Peter - 1998

In a complete financial market every contingent claim can be hedged perfectly. In an incomplete market it is possible to stay on the safe side by superhedging. But such strategies may require a large amount of initial capital. Here we study the question what an investor can do who is unwilling...

Persistent link: https://www.econbiz.de/10009574876

A minimality property of the minimal martingale measure

Schweizer, Martin - 1998

Let X be a continuous adapted process for which there exists an equivalent local martingale measure (ELMM). The minimal … martingale measure P is the unique ELMM for X with the property that local P-martingales strongly orthogonal to the P-martingale … ; minimal martingale measure ; equivalent martingale measures …

Persistent link: https://www.econbiz.de/10009578560

Efficient hedging : cost versus shortfall risk

Föllmer, Hans; Leukert, Peter - 1999

An investor faced with a contingent claim may eliminate risk by (super-)hedging in a financial market. As this is often quite expensive, we study partial hedges, which require less capital and reduce the risk. In a previous paper we determined quantile hedges which succeed with maximal...

Persistent link: https://www.econbiz.de/10009579176

A guided tour through quadratic hedging approaches

Schweizer, Martin - 1999

underlying discounted price process X is a local martingale. We then discuss the extension to local risk-minimization when X is a … semimartingale and explain the relations to the Föllmer-Schweizer decomposition and the minimal martingale measure. Finally we study … mean-variance hedging, the variance-optimal martingale measure and the connections to closeness properties of spaces of …

Persistent link: https://www.econbiz.de/10009582411

Mean-variance hedging for continuous processes : new proofs and examples

Pham, Huyên; Rheinländer, Thorsten; Schweizer, Martin - 1997

Persistent link: https://www.econbiz.de/10009632600

Malliavin's calculus in insider models : additional utility and free lunches

Imkeller, Peter - 2002

information drift, i.e. the drift to eliminate in order to preserve the martingale property in the insider's filtration, turns out … ; enlargement of filtrations ; Malliavin's calculus ; free lunch ; arbitrage ; equivalent martingale measure ; Bessel process …

Persistent link: https://www.econbiz.de/10009620768

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