Expected Shortfall and optimal hedging payoff

Expected Shortfall et payoff optimal de couverture

Olivier Guéant

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Abstract: By using variational techniques, we provide an optimal payoff written on a given random variable for hedging – in the sense of minimizing the Expected Shortfall at a given threshold – a payoff written on another random variable. In numerous financially relevant examples, our result leads to optimal payoffs in closed form. From a theoretical viewpoint, our result is also useful for providing bounds to the classical Expected Shortfall minimization problem with given financial instruments.

Date: 2018-04
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Published in Comptes Rendus. Mathématique, 2018, 356 (4), pp.433-438. ⟨10.1016/j.crma.2018.03.010⟩

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Working Paper: Expected Shortfall and optimal hedging payoff (2018)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-02862839

DOI: 10.1016/j.crma.2018.03.010

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