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Quantile hedging

Hans FÃllmer () and Peter Leukert ()
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Hans FÃllmer: Humboldt-UniversitÄt zu Berlin, Institut fØr Mathematik, Unter den Linden 6, D-10099 Berlin, Germany Manuscript
Peter Leukert: Humboldt-UniversitÄt zu Berlin, Institut fØr Mathematik, Unter den Linden 6, D-10099 Berlin, Germany Manuscript

Finance and Stochastics, 1999, vol. 3, issue 3, 251-273

Abstract: In a complete financial market every contingent claim can be hedged perfectly. In an incomplete market it is possible to stay on the safe side by superhedging. But such strategies may require a large amount of initial capital. Here we study the question what an investor can do who is unwilling to spend that much, and who is ready to use a hedging strategy which succeeds with high probability.

Keywords: Hedging; superhedging; Neyman Pearson lemma; stochastic volatility; value at risk (search for similar items in EconPapers)
JEL-codes: G10 G12 G13 D81 (search for similar items in EconPapers)
Date: 1999-05-03
Note: received: January 1998; final version received: August 1998
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