On the structure of general mean-variance hedging strategies

Aleš Černý, Jan Kallsen

Type: Article

Publication Date: 2007-07-01

Citations: 140

DOI: https://doi.org/10.1214/009117906000000872

Abstract

We provide a new characterization of mean-variance hedging strategies in a general semimartingale market. The key point is the introduction of a new probability measure P⋆ which turns the dynamic asset allocation problem into a myopic one. The minimal martingale measure relative to P⋆ coincides with the variance-optimal martingale measure relative to the original probability measure P.

Locations

The Annals of Probability - View - PDF
arXiv (Cornell University) - View - PDF
City Research Online (City University London) - View - PDF
MACAU: Open Access Repository of Kiel University (University Library Kiel) - View - PDF
DataCite API - View

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