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Quadratic Hedging For The Bates Model

Author

Listed:
  • FRIEDRICH HUBALEK

    (Department of Mathematical Sciences, University of Aarhus, Denmark)

  • CARLO SGARRA

    (Department of Mathematics, Politecnico di Milano, Italy)

Abstract

In the present paper we give some preliminary results for option pricing and hedging in the framework of the Bates model based on quadratic risk minimization. We provide an explicit expression of the mean-variance hedging strategy in the martingale case and study the Minimal Martingale measure in the general case.

Suggested Citation

  • Friedrich Hubalek & Carlo Sgarra, 2007. "Quadratic Hedging For The Bates Model," International Journal of Theoretical and Applied Finance (IJTAF), World Scientific Publishing Co. Pte. Ltd., vol. 10(05), pages 873-885.
    • Handle: RePEc:wsi:ijtafx:v:10:y:2007:i:05:n:s0219024907004433
    DOI: 10.1142/S0219024907004433
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    Citations

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    Cited by:

    1. Edie Miglio & Carlo Sgarra, 2008. "A Finite Element Framework for Option Pricing with the Bates Model," Papers 0812.3083, arXiv.org.
    2. Kallsen Jan & Muhle-Karbe Johannes, 2011. "Method of moment estimation in time-changed Lévy models," Statistics & Risk Modeling, De Gruyter, vol. 28(2), pages 169-194, May.
    3. Jan Kallsen & Arnd Pauwels, 2011. "Variance-Optimal Hedging for Time-Changed Levy Processes," Applied Mathematical Finance, Taylor & Francis Journals, vol. 18(1), pages 1-28.

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