Hedging portfolios in derivatives markets
|
Fri, 12/06/2009 14:15 |
Mike Teranchi (Cambridge) |
Nomura Seminar  |
DH 1st floor SR |
| We consider the classical problem of forming portfolios of vanilla options in order to hedge more exotic derivatives. In particular, we focus on a model in which the agent can trade a stock and a family of variance swaps written on that stock. The market is only approximately complete in the sense that any submarket consisting of the stock and the variance swaps of a finite set of maturities is incomplete, yet every bounded claim is in the closure of the set of attainable claims. Taking a Hilbert space approach, we give a characterization of hedging portfolios for a certain class of contingent claims. (Joint work with Francois Berrier) | |||