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On Discrete Time Hedging in D-dimensional Option Pricing Models by Hujo, Mika is a scholarly article available to read on EtoBox.

What is On Discrete Time Hedging in D-dimensional Option Pricing Models about?

We study the approximation of certain stochastic integrals with respect to a d-dimensional diffusion by corresponding stochastic integrals with piece-wise constant integrands. In finance this corresponds to replacing a continuously adjusted portfolio by discretely adjusted one. The approximation error is measured with respect to $L^2$ and it is shown that under certain assumptions the approximation rate is $n^{-1/2}$ when one optimizes over deterministic but not necessarily equidistant time-nets.

Author

Hujo, Mika

Published

2007

Language

EN