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Simplified Mean-Variance Portfolio Optimisation
Fontana, Claudio; Schweizer, Martin - National Centre of Competence in Research - Financial … - 2011
We propose a simplified approach to mean-variance portfolio problems by changingtheir parametrisation from trading strategies to final positions. This allows us to treat,under a very mild no-arbitrage-type assumption, a whole range of quadratic optimisationproblems by simple mathematical tools...
Persistent link: https://www.econbiz.de/10009418985
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Optimal Hedging of a Contingent Claim with Ambiguity Aversion
Hyun, Chongseok - 2012
We propose a model of hedging and investment with ambiguity aversion in an incomplete financial market. We show that … one can distinguish ambiguity averse agents from probabilistically sophisticated agents. Further, we generate the … hypothesis: an ambiguity averse agent chooses higher volatility when hedging a derivative position whose payoff function is …
Persistent link: https://www.econbiz.de/10013103139
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Optimal Hedging Strategies for Options in Electricity Futures Markets
Hess, Markus - 2021
In this paper, we derive optimal hedging strategies for options in electricity futures markets. Optimality is measured in terms of minimal variance and the associated minimal variance hedging portfolios are obtained by a stochastic maximum principle. Our explicit results are particularly useful...
Persistent link: https://www.econbiz.de/10013232821
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A Malliavin Calculus Approach to Minimal Variance Hedging
Hess, Markus - 2021
In this paper, we investigate the following problem: How can a financial institution, which has sold an option to a client, optimally hedge the payoff of this option by investing into a stock and into the option itself? Optimality is measured in terms of minimal variance and the associated...
Persistent link: https://www.econbiz.de/10013234161
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A New Approach to Minimal Variance Hedging of European Options (Part 2 : The Pure-Jump Case)
Hess, Markus - 2021
This paper addresses the following question: How can a financial institution, which has issued a European option, optimally hedge the payoff of this option by investing into the underlying stock and into the option itself? Here, optimality is measured in terms of minimal variance and the...
Persistent link: https://www.econbiz.de/10013236503
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A New Approach to Minimal Variance Hedging of European Options (Part 1 : The Brownian Motion Case)
Hess, Markus - 2021
This paper addresses the following question: How can a financial institution, which has issued a European option, optimally hedge the payoff of this option by investing into the underlying stock and into the option itself? Here, optimality is measured in terms of minimal variance and the...
Persistent link: https://www.econbiz.de/10013237327
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Ambiguity, Risk and Portfolio Choice under Incomplete Information
Miao, Jianjun - In: Annals of Economics and Finance 10 (2009) 2, pp. 257-279
there is a distinction between ambiguity and risk. The latter distinction is afforded by adoption of recursive multiple … arrives over time? (ii) What are the effects of ambiguity and incomplete information on behavior? This paper shows that it is … the resulting estimates. Finally, the paper shows that a hedging demand arises that is affected by both ambiguity and …
Persistent link: https://www.econbiz.de/10010554861
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Ambiguity, Risk and Portfolio Choice under Incomplete Information
Miao, Jianjun - Department of Economics, Boston University
there is a distinction between ambiguity and risk. The latter distinction is afforded by adoption of recursive multiple … arrives over time? (ii) What are the effects of ambiguity and incomplete information on behavior? This paper shows that it is … the resulting estimates. Finally, the paper shows that a hedging demand arises that is affected by both ambiguity and …
Persistent link: https://www.econbiz.de/10008545849
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Hedge and Speculate : Replicating Option Payoffs with Limit and Market Orders
Cartea, Álvaro - 2017
We consider an agent who takes a short position in a contingent claim and employs limit orders (LOs) and market orders (MOs) to trade in the underlying asset to maximize expected utility of terminal wealth. The agent solves a combined optimal stopping and control problem where trading has...
Persistent link: https://www.econbiz.de/10012958754
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Good Deal Hedging and Valuation Under Combined Uncertainty About Drift and Volatility
Becherer, Dirk - 2018
We derive robust good-deal hedges and valuations under combined model ambiguity about the drift and volatility of asset …
Persistent link: https://www.econbiz.de/10012934249