Optimization problem and mean variance hedging on defaultable claims

Stéphane Goutte and Armand Ngoupeyou

Papers from arXiv.org

Abstract: We study the pricing and the hedging of claim {\psi} which depends on the default times of two firms A and B. In fact, we assume that, in the market, we can not buy or sell any defaultable bond of the firm B but we can only trade defaultable bond of the firm A. Our aim is then to find the best price and hedging of {\psi} using only bond of the firm A. Hence, we solve this problem in two cases: firstly in a Markov framework using indifference price and solving a system of Hamilton-Jacobi-Bellman equations, secondly, in a more general framework, using the mean variance hedging approach and solving backward stochastic differential equations (BSDE).

Date: 2012-09
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://arxiv.org/pdf/1209.5953 Latest version (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:arx:papers:1209.5953

Access Statistics for this paper

More papers in Papers from arXiv.org
Bibliographic data for series maintained by arXiv administrators ().