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On the difference between locally risk-minimizing and delta hedging strategies for exponential L\'evy models

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  • Takuji Arai
  • Yuto Imai

Abstract

We discuss the difference between locally risk-minimizing and delta hedging strategies for exponential L\'evy models, where delta hedging strategies in this paper are defined under the minimal martingale measure. We give firstly model-independent upper estimations for the difference. In addition we show numerical examples for two typical exponential L\'evy models: Merton models and variance gamma models.

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  • Takuji Arai & Yuto Imai, 2016. "On the difference between locally risk-minimizing and delta hedging strategies for exponential L\'evy models," Papers 1610.09085, arXiv.org.
    • Handle: RePEc:arx:papers:1610.09085
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    File URL: http://arxiv.org/pdf/1610.09085
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    1. Takuji Arai & Yuto Imai & Ryoichi Suzuki, 2015. "Numerical analysis on local risk-minimization forexponential L\'evy models," Papers 1506.03898, arXiv.org.
    2. Stephan Denkl & Martina Goy & Jan Kallsen & Johannes Muhle-Karbe & Arnd Pauwels, 2013. "On the performance of delta hedging strategies in exponential L�vy models," Quantitative Finance, Taylor & Francis Journals, vol. 13(8), pages 1173-1184, July.
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