The optimal hedging price of a European type contingent claim

Author:
S. V. Posashkov

Translated by:
N. Semenov

Original publication:
Teoriya Imovirnostei ta Matematichna Statistika, tom **77** (2007).

Journal:
Theor. Probability and Math. Statist. **77** (2008), 147-154

MSC (2000):
Primary 60H30; Secondary 60J35, 60J65

Published electronically:
January 21, 2009

MathSciNet review:
2432778

Full-text PDF Free Access

Abstract | References | Similar Articles | Additional Information

Abstract: A financial market is considered in the paper for the case where the volatility is governed by fractional Brownian motion. We prove that the market is incomplete and find the optimal hedging price of a contingent claim that locally minimizes the risk. Under certain assumptions on the price function, we obtain a partial differential equation for the fair hedging price of a contingent claim.

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Additional Information

**S. V. Posashkov**

Affiliation:
Department of Probability Theory and Mathematical Statistics, Faculty for Mechanics and Mathematics, National Taras Shevchenko University, Academician Glushkov Avenue 6, Kyiv 03127, Ukraine

Email:
corlagon@univ.kiev.ua

DOI:
http://dx.doi.org/10.1090/S0094-9000-09-00753-4

Keywords:
Optimal hedging price,
fractional Brownian motion,
European type contingent claim

Received by editor(s):
August 31, 2006

Published electronically:
January 21, 2009

Article copyright:
© Copyright 2009
American Mathematical Society