Variance-Optimal Hedging for Time-Changed Levy Processes

Jan Kallsen and Arnd Pauwels

Applied Mathematical Finance, 2011, vol. 18, issue 1, 1-28

Abstract: In this article, we solve the variance-optimal hedging problem in stochastic volatility (SV) models based on time-changed Levy processes, that is, in the setup of Carr et al. (2003). The solution is derived using results for general affine models in the companion article [Kallsen and Pauwels (2009)].

Keywords: Variance-optimal hedging; Stochastic volatility; Time-changed Levy process; Laplace transform (search for similar items in EconPapers)
Date: 2011
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DOI: 10.1080/13504861003669164

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