Minimum variance hedging in a model with jumps at Poisson random times

Radchenko, V.

doi:10.1090/S0094-9000-09-00771-6

Minimum variance hedging in a model with jumps at Poisson random times

Author: V. M. Radchenko
Translated by: S. Kvasko
Journal: Theor. Probability and Math. Statist. 78 (2009), 175-190
MSC (2000): Primary 91B28; Secondary 60H05
DOI: https://doi.org/10.1090/S0094-9000-09-00771-6
Published electronically: August 4, 2009
MathSciNet review: 2446858
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Abstract: We consider a model where the price of an option is driven by a Wiener process and changes randomly at the moments determined by a homogeneous Poisson process. The formula for the minimum variance hedging strategy is obtained for a European type call option. The derivation of the formula is based on the Föllmer–Schweizer decomposition of a contingent claim.

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