Quantile hedging

Hans Föllmer and Peter Leukert

No 1998,13, SFB 373 Discussion Papers from Humboldt University of Berlin, Interdisciplinary Research Project 373: Quantification and Simulation of Economic Processes

Abstract: In a complete financial market every contingent claim can be hedged perfectly. In an incomplete market it is possible to stay on the safe side by superhedging. But such strategies may require a large amount of initial capital. Here we study the question what an investor can do who is unwilling to spend that much, and who is ready to use a hedging strategy which succeeds with high probability.

Keywords: Hedging; superhedging; Neyman Pearson lemma; stochastic volatility; value at risk (search for similar items in EconPapers)
JEL-codes: D81 G10 G12 G13 (search for similar items in EconPapers)
Date: 1998
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:sfb373:199813

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