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Comparing quadratic and non-quadratic local risk minimization for the hedging of contingent claims

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  • Frédéric Abergel

    (FiQuant - Chaire de finance quantitative - MICS - Mathématiques et Informatique pour la Complexité et les Systèmes - CentraleSupélec, MAS - Mathématiques Appliquées aux Systèmes - EA 4037 - Ecole Centrale Paris)

Abstract

In this note, I study further a new approach recently introduced for the hedging of derivatives in incomplete markets via non quadratic local risk minimization. A structure result is provided, which essentially shows the equivalence between non-quadratic risk minimization under the historical probability and quadratic local risk minimization under an equivalent, implicitly defined probability.

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  • Frédéric Abergel, 2013. "Comparing quadratic and non-quadratic local risk minimization for the hedging of contingent claims," Working Papers hal-00771528, HAL.
    • Handle: RePEc:hal:wpaper:hal-00771528
    Note: View the original document on HAL open archive server: https://hal.science/hal-00771528
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    References listed on IDEAS

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    1. Frédéric Abergel & Nicolas Millot, 2011. "Nonquadratic Local Risk-Minimization for Hedging Contingent Claims in Incomplete Markets," Post-Print hal-00620843, HAL.
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