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 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...

In this paper we derive asymptotic expansions for Australian options in the case of low volatility using the method of matched asymptotics. The expansion is performed on a volatility scaled parameter. We obtain a solution that is of up to the third order. In case that there is no drift in the...

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...

This paper investigates the use of the asymptotic Heston solution in locally risk minimizing 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 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...