Discrete-time variance-optimal hedging in affine stochastic volatility models

Kallsen, J.; Muhle-Karbe, J.; Shenkman, N.; Vierthauer, R.

Document type:: Buchbeitrag
Author(s):: Kallsen, J.; Muhle-Karbe, J.; Shenkman, N.; Vierthauer, R.
Cooperation:: -
Title:: Discrete-time variance-optimal hedging in affine stochastic volatility models
Pages contribution:: -
Abstract:: 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.
Editor:: Kiesel, R.; Scherer, M.; Zagst, R.; Editors
Book title:: Alternative Investments and Strategies
Intellectual Contribution:: Discipline-based Research
Publisher:: World Scientific
Publisher address:: Singapore
Year:: 2010
Reviewed:: ja
Language:: en
Semester:: SS 02
Format:: Text
Key publication:: Nein
Peer reviewed:: ja
International:: Ja
Book review:: Nein
Commissioned:: not commissioned
Category:: textbook
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