Stability and asymptotic analysis of the Föllmer–Schweizer decomposition on a finite probability space

@article{Boese2020StabilityAA,
  title={Stability and asymptotic analysis of the
F{\"o}llmer–Schweizer decomposition on a finite probability space},
  author={Sarah Boese and Tracy Cui and S. Johnston and G. Molino and Oleksii Mostovyi},
  journal={arXiv: Mathematical Finance},
  year={2020}
}
First, we consider the problem of hedging in complete binomial models. Using the discrete-time F\"ollmer-Schweizer decomposition, we demonstrate the equivalence of the backward induction and sequential regression approaches. Second, in incomplete trinomial models, we examine the extension of the sequential regression approach for approximation of contingent claims. Then, on a finite probability space, we investigate stability of the discrete-time F\"ollmer-Schweizer decomposition with respect… Expand
1 Citations
THE INFORMATION PREMIUM ON A FINITE PROBABILITY SPACE
On a finite probability space, we consider a problem of fair pricing of contingent claims in the sense of [FS89], and its sensitivity to a distortion of information, where we follow the weakExpand

References

SHOWING 1-10 OF 15 REFERENCES
Asymptotic analysis of the expected utility maximization problem with respect to perturbations of the numéraire
In an incomplete model, where under an appropriate num\'eraire, the stock price process is driven by a sigma-bounded semimartingale, we investigate the sensitivity of the expected utilityExpand
Sensitivity analysis of the utility maximisation problem with respect to model perturbations
We consider the expected utility maximisation problem and its response to small changes in the market price of risk in a continuous semimartingale setting. Assuming that the preferences of a rationalExpand
Follmer-Schweizer Decomposition and Mean-Variance Hedging for General Claims
Let X be an R d -valued special semimartingale on a probability space (Ω, F, (F t ) 0≤t≤T , P) with decomposition X = X 0 + M + A and Θ the space of all predictable, X-integrable processes θ suchExpand
Variance-Optimal Hedging in Discrete Time
  • M. Schweizer
  • Mathematics, Computer Science
  • Math. Oper. Res.
  • 1995
We solve the problem of approximating in (L-script) 2 a given random variable H by stochastic integrals G T ((theta)) of a given discrete-time process X . We interpret H as a contingent claim to beExpand
Sensitivity analysis of utility-based prices and risk-tolerance wealth processes
In the general framework of a semimartingale financial model and a utility function $U$ defined on the positive real line, we compute the first-order expansion of marginal utility-based prices withExpand
On the two-times differentiability of the value functions in the problem of optimal investment in incomplete markets
We study the two-times differentiability of the value functions of the primal and dual optimization problems that appear in the setting of expected utility maximization in incomplete markets. We alsoExpand
Approximating random variables by stochastic integrals
Let X be a semimartingale and Θ the space of all predictable X-integrable processes υ such that ∫υdX is in the space δ 2 of semimartingales. We consider the problem of approximating a given randomExpand
Hedging by Sequential Regression: An Introduction to the Mathematics of Option Trading
It is widely acknowledge that there has been a major breakthrough in the mathematical theory of option trading. This breakthrough, which is usually summarized by the Black–Scholes formula, hasExpand
Stochastic Calculus for Finance II: Continuous-Time Models
Need a terrific e-book? stochastic calculus for finance ii continuous time models springer finance by , the best one! Wan na get it? Locate this excellent e-book by right here now. Download andExpand
Interest Rate Models
n interest rate model is a probabilistic description of the future evolution of interest rates. Based on today's information, future interest rates are uncertain: An interest rate model is aExpand
...
1
2
...