Option pricing and hedging with minimum local expected shortfall
| dc.creator | Pochart, Benoît | |
| dc.creator | Bouchaud, Jean-Philippe | |
| dc.date | 2003-08-27 | |
| dc.date.accessioned | 2026-07-07T02:53:08Z | |
| dc.date.available | 2026-07-07T02:53:08Z | |
| dc.description | We propose a versatile Monte-Carlo method for pricing and hedging options when the market is incomplete, for an arbitrary risk criterion (chosen here to be the expected shortfall), for a large class of stochastic processes, and in the presence of transaction costs. We illustrate the method on plain vanilla options when the price returns follow a Student-t distribution. We show that in the presence of fat-tails, our strategy allows to significantly reduce extreme risks, and generically leads to low Gamma hedging. Similarly, the inclusion of transaction costs reduces the Gamma of the optimal strategy. | |
| dc.description | 23 pages, 7 figures, 8 tables | |
| dc.identifier | https://arxiv.org/abs/cond-mat/0308570 | |
| dc.identifier | http://arxiv.org/abs/cond-mat/0308570 | |
| dc.identifier.uri | http://salesiana.dossiersoluciones.com/handle/123456789/22098 | |
| dc.subject | Condensed Matter | |
| dc.title | Option pricing and hedging with minimum local expected shortfall | |
| dc.type | text |