Title :
Mean square optimal hedging with non-uniform rebalancing intervals
Author :
Sato, K. ; Yuji, Y. ; Fujioka, H.
Author_Institution :
Kyoto Univ., Kyoto
Abstract :
This paper proposes a method of discrete hedging by extending the MSOH (mean square optimal hedging) problem. In the proposed method, the risk of option sellers is minimized in terms of the mean square hedging error as in the MSOH problem, while it is allowed to rebalance with non-uniform intervals as opposed to the uniform assumption in the MSOH problem. The benefit of the extra freedom is demonstrated via numerical simulations.
Keywords :
financial data processing; least mean squares methods; discrete hedging; mean square optimal hedging; nonuniform rebalancing interval; Computational efficiency; Costs; Friction; Heart; Numerical simulation; Portfolios; Pricing; Security; Stochastic processes; Utility theory; non-uniform control; option hedging;
Conference_Titel :
SICE Annual Conference, 2008
Conference_Location :
Tokyo
Print_ISBN :
978-4-907764-30-2
Electronic_ISBN :
978-4-907764-29-6
DOI :
10.1109/SICE.2008.4655205
