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dc.contributor.authorMijatović, Aleksandar
dc.contributor.authorUrusov, Mikhail A.
dc.date.accessioned2011-03-20T12:01:16Z
dc.date.accessioned2016-10-05T14:14:20Z
dc.date.available2011-03-20T12:01:16Z
dc.date.available2016-10-05T14:14:20Z
dc.date.issued2011-05-21
dc.identifier.urihttp://publications.mfo.de/handle/mfo/1193
dc.descriptionResearch in Pairs 2011en_US
dc.description.abstractModelling stock prices via jump processes is common in financial markets. In practice, to hedge a contingent claim one typically uses the so-called delta-hedging strategy. This strategy stems from the Black–Merton–Scholes model where it perfectly replicates contingent claims. From the theoretical viewpoint, there is no reason for this to hold in models with jumps. However in practice the delta-hedging strategy is widely used and its potential shortcoming in models with jumps is disregarded since such models are typically incomplete and hence most contingent claims are non-attainable. In this note we investigate a complete model with jumps where the delta-hedging strategy is well-defined for regular payoff functions and is uniquely determined via the risk-neutral measure. In this setting we give examples of (admissible) delta-hedging strategies with bounded discounted value processes, which nevertheless fail to replicate the respective bounded contingent claims. This demonstrates that the deficiency of the delta-hedging strategy in the presence of jumps is not due to the incompleteness of the model but is inherent in the discontinuity of the trajectories.en_US
dc.language.isoenen_US
dc.publisherMathematisches Forschungsinstitut Oberwolfachen_US
dc.relation.ispartofseriesOberwolfach Preprints;2011,23
dc.subjectDelta hedgingen_US
dc.subjectexact replicationen_US
dc.subjectmartingale representationen_US
dc.subjectBlack–Merton–Scholes modelen_US
dc.subjectmodels with jumpsen_US
dc.titleA note on delta hedging in markets with jumpsen_US
dc.typePreprinten_US
dc.rights.licenseDieses Dokument darf im Rahmen von § 53 UrhG zum eigenen Gebrauch kostenfrei heruntergeladen, gelesen, gespeichert und ausgedruckt, aber nicht im Internet bereitgestellt oder an Außenstehende weitergegeben werden.de
dc.rights.licenseThis document may be downloaded, read, stored and printed for your own use within the limits of § 53 UrhG but it may not be distributed via the internet or passed on to external parties.en
dc.identifier.doi10.14760/OWP-2011-23
local.scientificprogramResearch in Pairs 2011
local.series.idOWP-2011-23
dc.identifier.urnurn:nbn:de:101:1-201108303152
dc.identifier.ppn1651010234


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