Annals of Probability

On the structure of general mean-variance hedging strategies

Abstract

We provide a new characterization of mean-variance hedging strategies in a general semimartingale market. The key point is the introduction of a new probability measure P which turns the dynamic asset allocation problem into a myopic one. The minimal martingale measure relative to P coincides with the variance-optimal martingale measure relative to the original probability measure P.

Article information

Source
Ann. Probab., Volume 35, Number 4 (2007), 1479-1531.

Dates
First available in Project Euclid: 8 June 2007

https://projecteuclid.org/euclid.aop/1181334251

Digital Object Identifier
doi:10.1214/009117906000000872

Mathematical Reviews number (MathSciNet)
MR2330978

Zentralblatt MATH identifier
1124.91028

Citation

Černý, Aleš; Kallsen, Jan. On the structure of general mean-variance hedging strategies. Ann. Probab. 35 (2007), no. 4, 1479--1531. doi:10.1214/009117906000000872. https://projecteuclid.org/euclid.aop/1181334251

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