This paper investigates the use of the asymptotic Heston solution in locally risk minimising hedging. The asymptotic Heston solution is presented along with issues that are relevant to its use. Comparison between the exact and asymptotic Heston hedges are made using both simulated and real...

We use Malliavin calculus and the Clark–Ocone formula to derive the hedging strategy of an arithmetic Asian Call option in general terms. Furthermore we derive an expression for the density of the integral over time of a geometric Brownian motion, which allows us to express hedging strategy...

We study the classical real option problem in which an agent faces the decision if and when to invest optimally into a project. The investment is assumed to be irreversible. This problem has been studied by Myers and Majd (Adv Futures Options Res 4:1–21, 1990) for the case of a complete...

This paper investigates an optimal investment problem faced by a defined contribution (DC) pension fund manager under inflationary risk. It is assumed that a representative member of a DC pension plan contributes a fixed share of his salary to the pension fund during the finite time horizon [0,...

We study the classical real option problem in which an agent faces the decision if and when to invest optimally into a project. The investment is assumed to be irreversible. This problem has been studied by Myers and Majd (Adv Futures Options Res 4:1–21, 1990) for the case of a complete...

We show that Australian options are equivalent to fixed or floating strike Asian options and consequently that by studying Asian options from the Australian perspective and vice versa, much can be gained. One specific application of this “Australian approach” leads to a natural dimension...

We consider the classical investment timing problem in a framework where the instantaneous volatility of the project value is itself given by a stochastic process, hence lifting the old question about the investment–uncertainty relationship to a new level. Motivated by the classical cases of...