Residual risks and hedging strategies in Markovian markets

Nicolas Bouleau (1) , Damien Lamberton (1)

1 CERMA - Centre d'Enseignement et de Recherche en Mathématiques Appliquées

We prove two explicit formulae for the quadratic residual risk and for the optimal hedging portfolio of a European contingent claim when the underlying stock prices are functions of a Markov process

Mots clés: option; residual risk; hedging; Markov process; Dirichlet form; square field operator

Domaines: Probabilités [math.PR]

Nicolas Bouleau, Damien Lamberton. Residual risks and hedging strategies in Markovian markets. Stochastic Processes and their Applications, 1989, 33, pp.131-150. ⟨hal-00017929⟩