Okhrati, R;
Balbás, A;
Garrido, J;
(2014)
Hedging of defaultable claims in a structural model using a locally risk-minimizing approach.
Stochastic Processes and their Applications
, 124
(9)
pp. 2868-2891.
10.1016/j.spa.2014.04.001.
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Abstract
In the context of a locally risk-minimizing approach, the problem of hedging defaultable claims and their Föllmer–Schweizer decompositions are discussed in a structural model. This is done when the underlying process is a finite variation Lévy process and the claims pay a predetermined payout at maturity, contingent on no prior default. More precisely, in this particular framework, the locally risk-minimizing approach is carried out when the underlying process has jumps, the derivative is linked to a default event, and the probability measure is not necessarily risk-neutral.
| Type: | Article |
|---|---|
| Title: | Hedging of defaultable claims in a structural model using a locally risk-minimizing approach |
| Open access status: | An open access version is available from UCL Discovery |
| DOI: | 10.1016/j.spa.2014.04.001 |
| Publisher version: | https://doi.org/10.1016/j.spa.2014.04.001 |
| Language: | English |
| Additional information: | This version is the author accepted manuscript. For information on re-use, please refer to the publisher’s terms and conditions. |
| Keywords: | Defaultable claims, Hedging strategy, Locally risk-minimizing, Föllmer–Schweizer decomposition, Galtchouk–Kunita–Watanabe decomposition |
| UCL classification: | UCL UCL > Provost and Vice Provost Offices > UCL BEAMS UCL > Provost and Vice Provost Offices > UCL BEAMS > Faculty of Engineering Science UCL > Provost and Vice Provost Offices > UCL BEAMS > Faculty of Engineering Science > Dept of Civil, Environ and Geomatic Eng |
| URI: | https://discovery.ucl.ac.uk/id/eprint/10081498 |
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