Some applications of L2-hedging with a non-negative wealth process

Ralf Korn

Applied Mathematical Finance, 1997, vol. 4, issue 1, 65-79

Abstract: We consider the problem of L2-hedging of contingent claims in diffusion type models for securities markets. In contrast to a recent paper of Schweizer (1994) we insist on a non-negative wealth process corresponding to the optimal hedge portfolio. For this reason the usual projection methods cannot be applied. We give some applications of L2-hedging in this setting including hedging under constraints, a problem of approximating the wealth process of a richer investor and a mean-variance version of it.

Keywords: Hedging; Portfolio Optimization; Continuous Trading; Complete; Incomplete; Markets (search for similar items in EconPapers)
Date: 1997
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Citations: View citations in EconPapers (4)

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DOI: 10.1080/135048697334836

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