On the Structure of General Mean-Variance Hedging Strategies

Ale\v{s} \v{C}ern\'y and Jan Kallsen
Authors registered in the RePEc Author Service: Aleš Černý

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Abstract: We provide a new characterization of mean-variance hedging strategies in a general semimartingale market. The key point is the introduction of a new probability measure $P^{\star}$ which turns the dynamic asset allocation problem into a myopic one. The minimal martingale measure relative to $P^{\star}$ coincides with the variance-optimal martingale measure relative to the original probability measure $P$.

Date: 2007-08, Revised 2017-07
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Citations: View citations in EconPapers (17)

Published in Annals of Probability 2007, Vol. 35, No. 4, 1479-1531

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Persistent link: https://EconPapers.repec.org/RePEc:arx:papers:0708.1715

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