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Hedging in a market with jumps - an FBSDE approach

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  • Evelina Shamarova
  • Rui S'a Pereira

Abstract

We propose a model for hedging in a market with jumps for a large investor. The dynamics of the stock prices and the value process is governed by forward-backward SDEs driven by Teugels martingales. Unlike known FBSDE market models, ours accounts for jumps in stock prices. Moreover, it allows to find an optimal hedging strategy.

Suggested Citation

  • Evelina Shamarova & Rui S'a Pereira, 2013. "Hedging in a market with jumps - an FBSDE approach," Papers 1309.2211, arXiv.org, revised Aug 2017.
    • Handle: RePEc:arx:papers:1309.2211
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    2. Black, Fischer & Scholes, Myron S, 1973. "The Pricing of Options and Corporate Liabilities," Journal of Political Economy, University of Chicago Press, vol. 81(3), pages 637-654, May-June.
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