Minimal Variance Hedging of Options with Student-t Underlying

K. Pinn

Papers from arXiv.org

Abstract: I explicitly work out closed form solutions for the optimal hedging strategies (in the sense of Bouchaud and Sornette) in the case of European call options, where the underlying is modeled by (unbiased) iid additive returns with Student-t distributions. The results may serve as illustrative examples for option pricing in the presence of fat tails.

Date: 1999-07, Revised 1999-12
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