A numerical scheme for the quantile hedging problem

Cyril B\'en\'ezet, Jean-Fran\c{c}ois Chassagneux and Christoph Reisinger

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Abstract: We consider the numerical approximation of the quantile hedging price in a non-linear market. In a Markovian framework, we propose a numerical method based on a Piecewise Constant Policy Timestepping (PCPT) scheme coupled with a monotone finite difference approximation. We prove the convergence of our algorithm combining BSDE arguments with the Barles & Jakobsen and Barles & Souganidis approaches for non-linear equations. In a numerical section, we illustrate the efficiency of our scheme by considering a financial example in a market with imperfections.

Date: 2019-02
New Economics Papers: this item is included in nep-cmp and nep-rmg
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Citations: View citations in EconPapers (3)

Published in SIAM J. Finan. Math. 12-1 (2021), pp. 110-157

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Persistent link: https://EconPapers.repec.org/RePEc:arx:papers:1902.11228

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