On the difference between locally risk-minimizing and delta hedging strategies for exponential Lévy models

Takuji Arai, Yuto Imai

Research output: Contribution to journalArticlepeer-review

3 Citations (Scopus)

Abstract

We discuss the difference between locally risk-minimizing and delta hedging strategies for exponential Lévy models, where delta hedging strategies in this paper are defined under the minimal martingale measure. We give firstly model-independent upper estimations for the difference. In addition we show numerical examples for two typical exponential Lévy models: Merton models and variance gamma models.

Original languageEnglish
Pages (from-to)845-858
Number of pages14
JournalJapan Journal of Industrial and Applied Mathematics
Volume34
Issue number3
DOIs
Publication statusPublished - 2017 Nov 1

Keywords

  • Delta hedging strategy
  • Exponential Lévy models
  • Fast Fourier transform
  • Local risk-minimization

ASJC Scopus subject areas

  • Engineering(all)
  • Applied Mathematics

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