Optimal hedging through limit orders

This article applies the methods of stochastic dynamic programming to a risk management problem, where an agent hedges her derivative position by submitting limit orders. Therefore, this model is the first, in the literature on optimal trading with limit orders, to handle a problem of hedging option...

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Veröffentlicht in:Stochastic models 2016-10, Vol.32 (4), p.593-605
1. Verfasser: Agliardi, Rossella
Format: Artikel
Sprache:eng
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Zusammenfassung:This article applies the methods of stochastic dynamic programming to a risk management problem, where an agent hedges her derivative position by submitting limit orders. Therefore, this model is the first, in the literature on optimal trading with limit orders, to handle a problem of hedging options or other derivatives. A hedging strategy is developed where both the size and the limit price of each order is optimally set.
ISSN:1532-6349
1532-4214
DOI:10.1080/15326349.2016.1188014