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Quantile Hedging for Defaultable Claims

In: Recent Advances In Financial Engineering 2009

Author

Listed:
  • Yumiharu Nakano

    (Graduate School of Innovation Management, Tokyo Institute of Technology, 2-12-1 Ookayama 152-8552, Tokyo, Japan and PRESTO, Japan Science and Technology Agency, 4-1-8 Honcho Kawaguchi, Saitama 332-0012, Japan)

Abstract

We study the quantile hedging problem for defaultable claims in incomplete markets modeled by Itô processes, in the case where the portfolio processes are adapted to the full filtration. Using the convex duality method as in Cvitanić and Karatzas (Bernoulli, 7 (2001), 79–97) and a good structure of the class of the equivalent martingale measures, we derive a closed form solution for the problem.

Suggested Citation

  • Yumiharu Nakano, 2010. "Quantile Hedging for Defaultable Claims," World Scientific Book Chapters, in: Masaaki Kijima & Chiaki Hara & Keiichi Tanaka & Yukio Muromachi (ed.), Recent Advances In Financial Engineering 2009, chapter 9, pages 219-230, World Scientific Publishing Co. Pte. Ltd..
    • Handle: RePEc:wsi:wschap:9789814304078_0009
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