Corpus ID: 210178414

Stability and asymptotic analysis of the F\"ollmer-Schweizer decomposition on a finite probability space

@article{Boese2020StabilityAA,
  title={Stability and asymptotic analysis of the F\"ollmer-Schweizer decomposition on a finite probability space},
  author={Sarah Boese and T. Cui and S. Johnston and G. Molino and Oleksii Mostovyi},
  journal={arXiv: Mathematical Finance},
  year={2020}
}
  • Sarah Boese, T. Cui, +2 authors Oleksii Mostovyi
  • Published 2020
  • Economics
  • arXiv: Mathematical Finance
  • 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… CONTINUE READING

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