Mean variance hedging in a general jump model

Kohlmann, Michael; Xiong, Dewen; Ye, Zhongxing

Mean variance hedging in a general jump model

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Date

2010

Authors

Kohlmann, Michael

Xiong, Dewen

Ye, Zhongxing

Publication type

Journal article

Published in

Applied mathematical finance ; 17 (2010), 1. - pp. 29-57

Abstract

We consider the mean-variance hedging of a contingent claim H when the discounted price process S is an [image omitted]-valued quasi-left continuous semimartingale with bounded jumps. We relate the variance-optimal martingale measure (VOMM) to a backward semimartingale equation (BSE) and show that the VOMM is equivalent to the original measure P if and only if the BSE has a solution. For a general contingent claim, we derive an explicit solution of the optimal strategy and the optimal cost of the mean-variance hedging by means of another BSE and an appropriate predictable process δ

Subject (DDC)

510 Mathematics

Keywords

backward semimartingale equations,Mean-variance hedging,variance-optimal martingale measure,speculation,investments,securities

Cite This

ISO 690

KOHLMANN, Michael, Dewen XIONG, Zhongxing YE, 2010. Mean variance hedging in a general jump model. In: Applied mathematical finance. 17(1), pp. 29-57. Available under: doi: 10.1080/13504860903075605

BibTex

@article{Kohlmann2010varia-763,
  year={2010},
  doi={10.1080/13504860903075605},
  title={Mean variance hedging in a general jump model},
  number={1},
  volume={17},
  journal={Applied mathematical finance},
  pages={29--57},
  author={Kohlmann, Michael and Xiong, Dewen and Ye, Zhongxing}
}

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Bibliography of Konstanz

Yes