Variance Optimal Hedging for continuous time processes with independent increments and applications

Abstract

For a large class of vanilla contingent claims, we establish an explicit Föllmer-Schweizer decomposition when the underlying is a process with independent increments (PII) and an exponential of a PII process. This allows to provide an efficient algorithm for solving the mean variance hedging problem. Applications to models derived from the electricity market are performed.

References in corpus (1)

• Analysis of Fourier transform valuation formulas and applications

Cited by in corpus (1)

• Variance Optimal Hedging for discrete time processes with independent increments. Application to Electricity Markets