Analysis of Error with Malliavin Calculus: Application to Hedging
Year: 2003
Type: article
Abstract: The aim of this paper is to compute the quadratic error of a discrete time‐hedging strategy in a complete multidimensional model. This result extends that of Gobet and Temam (2001) and Zhang (1999) . More precisely, our basic assumption is that the asset prices satisfy the d‐dimensional stochastic differential equation dXit=Xit(bi(Xt)dt+σi,j(Xt)dWjt). We precisely describe the risk of this strategy with respect to n, the number of rebalancing times. The rates of convergence obtained are for any options with Lipschitz payoff and 1/n1/4 for options with irregular payoff.
Source: Mathematical Finance
Author: E. Temam
Language: English
Subfield: Finance
Domain: Social Sciences
Open Access status: green
OpenAlex ID: W2086923919