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An algorithmic approach to non-self-financing hedging in a discrete-time incomplete market
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N. Josephy
Published/Copyright:
June 27, 2007
We present an algorithm producing a dynamic non-self-financing hedging strategy in an incomplete market corresponding to investor-relevant risk criterion. The optimisation is a two stage process that first determines admissible model parameters that correspond to the market price of the option being hedged. The second stage applies various merit functions to bootstrapped samples of model residuals to choose an optimal set of model parameters from the admissible set. Results are presented for options traded on the New York Stock Exchange.
Published Online: 2007-06-27
Published in Print: 2007-06-19
Copyright 2007, Walter de Gruyter
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Articles in the same Issue
- Quadratic assignment problems with additively monotone matrices and incomplete anti-Monge matrices: conditions for effective solvability
- Periodic properties of a simplest 2-linear shift register
- Implications of a system of linear equations over a module
- Incompatible transformations of principal ideal rings
- On a method to set up a covert channel and estimation of its tolerance for interference
- An algorithmic approach to non-self-financing hedging in a discrete-time incomplete market
