Numerical analysis on quadratic hedging strategies for normal inverse Gaussian models

Abstract

The authors aim to develop numerical schemes of the two representative quadratic hedging strategies: locally risk minimizing and mean-variance hedging strategies, for models whose asset price process is given by the exponential of a normal inverse Gaussian process, using the results of Arai et al. \cite{AIS}, and Arai and Imai. Here normal inverse Gaussian process is a framework of Lévy processes frequently appeared in financial literature. In addition, some numerical results are also introduced.