DocumentCode :
3526549
Title :
Delta hedging in financial engineering: Towards a model-free approach
Author :
Fliess, Michel ; Join, Cedric
Author_Institution :
INRIA-ALIEN & LIX (CNRS, UMR 7161), Ecole Polytech., Palaiseau, France
fYear :
2010
fDate :
23-25 June 2010
Firstpage :
1429
Lastpage :
1434
Abstract :
Delta hedging, which plays a crucial rôle in modern financial engineering, is a tracking control design for a “risk-free” management. We utilize the existence of trends in financial time series (Fliess M., Join C.: A mathematical proof of the existence of trends in financial time series, Proc. Int. Conf. Systems Theory: Modelling, Analysis and Control, Fes, 2009. Online: http://hal.inria.fr/inria-00352834/en/) in order to propose a model-free setting for delta hedging. It avoids most of the shortcomings encountered with the now classic Black-Scholes-Merton framework. Several convincing computer simulations are presented. Some of them are dealing with abrupt changes, i.e., jumps.
Keywords :
Computational modeling; Equations; Finance; Mathematical model; Presses; Pricing; Time series analysis; Financial engineering; abrupt changes; delta hedging; dynamic hedging; jumps; model-free control; quick fluctuations; tracking control; trends;
fLanguage :
English
Publisher :
ieee
Conference_Titel :
Control & Automation (MED), 2010 18th Mediterranean Conference on
Conference_Location :
Marrakech, Morocco
Print_ISBN :
978-1-4244-8091-3
Type :
conf
DOI :
10.1109/MED.2010.5547847
Filename :
5547847
Link To Document :
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