Residual risks and hedging strategies in Markovian markets

Nicolas Bouleau and Damien Lamberton

Stochastic Processes and their Applications, 1989, vol. 33, issue 1, 131-150

Abstract: We prove two explicit formulae for the quadratic residual risk and for the optimal hedging portfolio of a European contingent claim when the underlying stock prices are functions of a Markov process. These expressions allow the practical handling of a great deal of non classical models which are less optimistic than Black and Scholes's one

Keywords: right; Markov; processes; symmetric; Markov; processes; carre; du; champ; operator; processes; with; independent; increments; options; hedging; strategies; portfolios (search for similar items in EconPapers)
Date: 1989
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Citations: View citations in EconPapers (25)

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