Hedging of the European Option with Nonsmooth Payment Function

Hedging of the European Option with Nonsmooth Payment Function

We consider one kind of European option for the Black–Scholes model of financial market whose payment function is a certain combination of binary and Asian options. The corresponding hedging scheme is analyzed. We deduce a formula for the Clark stochastic integral representation of the corresponding...

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Veröffentlicht in:Ukrainian mathematical journal 2018-11, Vol.70 (6), p.890-905
Hauptverfasser: Glonti, O. A., Purtukhiya, O. G.
Format: Artikel
Sprache:eng
Schlagworte:
Algebra
Analysis
Applications of Mathematics
Geometry
Hedging
Mathematics
Mathematics and Statistics
Options trading
Statistics
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Zusammenfassung:We consider one kind of European option for the Black–Scholes model of financial market whose payment function is a certain combination of binary and Asian options. The corresponding hedging scheme is analyzed. We deduce a formula for the Clark stochastic integral representation of the corresponding Wiener functional whose integrand is presented in the explicit form.
ISSN:0041-5995
1573-9376
DOI:10.1007/s11253-018-1540-x