Kallsen, J.; Muhle-Karbe, J.; Shenkman, N.; Vierthauer, R.
Discrete-time variance-optimal hedging in affine stochastic volatility models
We consider variance-optimal hedging when trading is restricted to a finite time set. Using Laplace transform methods, we derive semi-explicit formulas for the varianceoptimal initial capital and hedging strategy in affine stochastic volatility models. For the corresponding minimal expected squared hedging error, we propose a closed-form approximation as well as a simulation approach. The results are illustrated by computing the relevant quantities in a time-changed Lévy model.