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Variance-minimizing hedging in a model with jumps at deterministic times. (English. Russian original) Zbl 1255.91407

Theory Probab. Appl. 51, No. 3, 536-545 (2007); translation from Teor. Veroyatn. Primen. 51, No. 3, 608-618 (2007).
Summary: We consider a model in which the asset price is driven by the Wiener process and, in addition, has random changes at earlier known nonrandom time moments. The explicit form of the variance-minimizing hedging strategy for the European call option is derived. The results are based on the Föllmer-Schweizer decomposition of contingent claims.

MSC:

91G20 Derivative securities (option pricing, hedging, etc.)
60J75 Jump processes (MSC2010)
91B25 Asset pricing models (MSC2010)
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