Option pricing and portfolio hedging under the mixed hedging strategy

Xiao-Tian Wang, Zhong-Feng Zhao and Xiao-Fen Fang

Physica A: Statistical Mechanics and its Applications, 2015, vol. 424, issue C, 194-206

Abstract: This paper is concerned in the option pricing and portfolio hedging in a discrete time incomplete market. It has been shown that scaling and residual risks as well as the mixed hedging strategy play an important role in option pricing and portfolio hedging in a discrete time case. In particular, the relation between scaling (i.e., trading frequency) and portfolio hedging is discussed.

Keywords: Residual risk; Scaling; Option pricing; Portfolio hedging; Trade frequency; Mixed hedging strategy (search for similar items in EconPapers)
Date: 2015
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Citations: View citations in EconPapers (5)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:phsmap:v:424:y:2015:i:c:p:194-206

DOI: 10.1016/j.physa.2015.01.021

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