Weak Convergence of Hedging Strategies of Contingent Claims

Jean-Luc Prigent and Olivier Scaillet

FAME Research Paper Series from International Center for Financial Asset Management and Engineering

Abstract: This paper presents results on the convergence for hedging strategies in the setting of incomplete financial markets. We examine the convergence of the so-called locally risk-minimizing strategy. It is proved that such a choice for the trading strategy, when perfect hedging of contingent claims is infeasible, is robust under weak convergence. Several fundamental examples, such as trinomial trees and stochastic volatility models, extracted from the financial modeling literature illustrate this property for both deterministic and random time intervals shrinking to zero.

Keywords: Weak convergence; Incomplete financial markets; Locally risk-minimizing strategy; Hedging strategy; Minimal martingale measure (search for similar items in EconPapers)
Date: 2002-01
References: Add references at CitEc
Citations: View citations in EconPapers (5)

Downloads: (external link)
http://www.swissfinanceinstitute.ch/rp39.pdf (application/pdf)
Our link check indicates that this URL is bad, the error code is: 404 Not Found (http://www.swissfinanceinstitute.ch/rp39.pdf [301 Moved Permanently]--> https://www.sfi.ch/rp39.pdf [302 Found]--> https://www.sfi.ch/en/rp39.pdf)

Related works:
Working Paper: Weak Convergence of Hedging Strategies of Contingent Claims (2000)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:fam:rpseri:rp39

Access Statistics for this paper

More papers in FAME Research Paper Series from International Center for Financial Asset Management and Engineering Contact information at EDIRC.
Bibliographic data for series maintained by Ridima Mittal ().