Local risk-minimization under partially observed Markov-modulated Exponential Levy model
Document Type
Lecture
Publication Date
10-17-2024
Abstract
The option hedging problem for a Markov-modulated exponential Lévy model is examined. This incomplete market model is based on a Markov additive process for which the Markov component plays a prominent role. In general, the full information about this component is not available to the investor in the market. Thus, we study optimal hedging strategies for European derivatives based on a model with partial or incomplete information. We employ the local risk-minimization approach to develop optimal hedging strategies under full information. Then, we project the hedging strategies on the observed information to obtain hedging strategies under partial information.
Relational Format
presentation
Recommended Citation
Momeya, Romuald, "Local risk-minimization under partially observed Markov-modulated Exponential Levy model" (2024). Probability & Statistics Seminar. 3.
https://egrove.olemiss.edu/math_statistics/3
