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Hedging strategies for discretely monitored Asian options under Lévy processes. (English) Zbl 1285.91132

Summary: We consider a variance-optimal hedging strategy for discretely sampled geometric Asian options, under exponential Lévy dynamics. Since it is difficult to hedge these instruments perfectly, here we choose to maximize a quadratic utility function and give the expressions of hedging strategies explicitly, based on the derived Föllmer-Schweizer decomposition of the contingent claim of geometric Asian options monitored at discrete times. The expression of its corresponding error is also given.

MSC:

91G20 Derivative securities (option pricing, hedging, etc.)
60G51 Processes with independent increments; Lévy processes
91G60 Numerical methods (including Monte Carlo methods)
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References:

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