Local risk-minimization for Lévy markets

Takuji Arai () and Ryoichi Suzuki ()
Additional contact information
Takuji Arai: Department of Economics, Keio University, 2-15-45 Mita, Minato-ku, Tokyo, 108-8345, Japan
Ryoichi Suzuki: Department of Mathematics, Keio University, 3-14-1 Hiyoshi, Kohoku-ku, Yokohama, 223-8522, Japan

International Journal of Financial Engineering (IJFE), 2015, vol. 02, issue 02, 1-28

Abstract: In this paper, we aim to obtain explicit representations of locally risk-minimizing by using Malliavin calculus for Lévy processes. For incomplete market models whose asset price is described by a solution to a stochastic differential equation driven by a Lévy process, we derive general formulas of locally risk-minimizing including Malliavin derivatives; and calculate its concrete expressions for call options, Asian options and lookback options.

Keywords: Incomplete markets; local risk-minimization; call options; Asian options; lookback options; Lévy processes; Malliavin calculus; Clark–Ocone formula (search for similar items in EconPapers)
Date: 2015
References: View complete reference list from CitEc
Citations: View citations in EconPapers (8)

Downloads: (external link)
http://www.worldscientific.com/doi/abs/10.1142/S2424786315500152
Access to full text is restricted to subscribers

Related works:
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:wsi:ijfexx:v:02:y:2015:i:02:n:s2424786315500152

Ordering information: This journal article can be ordered from

DOI: 10.1142/S2424786315500152

Access Statistics for this article

International Journal of Financial Engineering (IJFE) is currently edited by George Yuan

More articles in International Journal of Financial Engineering (IJFE) from World Scientific Publishing Co. Pte. Ltd.
Bibliographic data for series maintained by Tai Tone Lim ().