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Variance Optimal Hedging for continuous time processes with independent increments and applications

Stéphane Goutte (), Nadia Oudjane and Francesco Russo
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Nadia Oudjane: LAGA
Francesco Russo: LAGA, MathFi, CERMICS

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Abstract: For a large class of vanilla contingent claims, we establish an explicit F\"ollmer-Schweizer decomposition when the underlying is a process with independent increments (PII) and an exponential of a PII process. This allows to provide an efficient algorithm for solving the mean variance hedging problem. Applications to models derived from the electricity market are performed.

Date: 2009-12
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