We propose different schemes for option hedging when asset returns are modeled using a general class of GARCH models. More specifically, we implement local risk minimization and a minimum variance hedge approximation based on an extended Girsanov principle that generalizes Duan's (1995) delta...

This paper proposes an efficient way to implement quadratic hedging schemes for European options when the asset return process follows an asymmetric non-affine GARCH model driven by Gaussian innovations. More specifically, using a lattice approximation for the underlying, we construct locally...

This paper discusses risk-minimizing hedging strategies under affine GARCH models driven by Gaussian innovations. First, we derive a closed-form expression for an optimal hedge ratio under this model that is applicable to European derivatives with payoff functions that admit an inverse Laplace...

In this article, we show, in the context of partial hedging, that some important relationships about comonotonicity and convex order cannot be translated to counter-monotonicity in general because of the possibility of over-hedging. We propose a new notion called proper hedge that can e...