Mean-variance hedging under uncertain stock appreciation rates

Kohlmann, Michael; Tang, Shanjian

Mean-variance hedging under uncertain stock appreciation rates

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Date

2002

Authors

Kohlmann, Michael

Tang, Shanjian

Publication type

Contribution to a conference collection

Published in

8th International Conference on Advances in Communication and Control : telecommunications / signal processing ; June 25 - 29, 2001, Crete, Greece / Wells, William R. (ed.). - New York : Optimization Software, 2002. - pp. 15-22. - ISBN 0-911575-78-2

Abstract

We study the mean-variance hedging problem in an incomplete financial market where the stock appreciation rates are modeled by a random vector which has known distribution and is independent of the driving Brownian motion. The optimal hedging policy is derived explicitly and the approximation pricing equation is derived. The tools used here include backward stochastic differential equations, functional analysis (for the existence part), partially observed maximum principle and filtering theory (for the explicit solution). The separation principle turns out to hold.

Subject (DDC)

510 Mathematics

Conference

8th International Conference on Advances in Communication and Control, Jun 25, 2001 - Jun 29, 2001, Crete, Greece

Cite This

ISO 690

KOHLMANN, Michael, Shanjian TANG, 2002. Mean-variance hedging under uncertain stock appreciation rates. 8th International Conference on Advances in Communication and Control. Crete, Greece, Jun 25, 2001 - Jun 29, 2001. In: WELLS, William R., ed.. 8th International Conference on Advances in Communication and Control : telecommunications / signal processing ; June 25 - 29, 2001, Crete, Greece. New York:Optimization Software, pp. 15-22. ISBN 0-911575-78-2

BibTex

@inproceedings{Kohlmann2002Meanv-25842,
  year={2002},
  title={Mean-variance hedging under uncertain stock appreciation rates},
  isbn={0-911575-78-2},
  publisher={Optimization Software},
  address={New York},
  booktitle={8th International Conference on Advances in Communication and Control : telecommunications / signal processing ; June 25 - 29, 2001, Crete, Greece},
  pages={15--22},
  editor={Wells, William R.},
  author={Kohlmann, Michael and Tang, Shanjian}
}

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