Variance optimal hedging for continuous time additive processes and applications

Abstract

For a large class of vanilla contingent claims, we establish an explicit Föllmer-Schweizer decomposition when the underlying is an exponential of an additive 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.

Cited by in corpus (1)

• Optimization problem and mean variance hedging on defaultable claims