Optimal Hedging in Discrete and Continuous Time

@inproceedings{Remillard2009OptimalHI,
  title={Optimal Hedging in Discrete and Continuous Time},
  author={B. Remillard and Sylvain Rubenthaler},
  year={2009}
}
In this article we find the optimal solution of the hedging problem in discrete time by minimizing the mean square hedging error, when the underlying assets are multidimensional, extending the results of Schweizer (1995). We also find explicit expressions for the optimal hedging problem in continuous time when the underlying assets are modeled by a regime-switching geometric Lévy process. It is also shown that the continuous time solution can be approximated by discrete time Hidden Markov… CONTINUE READING

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Option pricing and dynamic hedging for regimeswitching geometric random walks

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