A Monte Carlo method for exponential hedging of contingent claims

Simple item page
dc.creatorGrasselli, M. R.
dc.creatorHurd, T. R.
dc.date2002-11-25
dc.date.accessioned2026-07-07T12:11:07Z
dc.date.available2026-07-07T12:11:07Z
dc.descriptionUtility based methods provide a very general theoretically consistent approach to pricing and hedging of securities in incomplete financial markets. Solving problems in the utility based framework typically involves dynamic programming, which in practise can be difficult to implement. This article presents a Monte Carlo approach to optimal portfolio problems for which the dynamic programming is based on the exponential utility function U(x)=-exp(-x). The algorithm, inspired by the Longstaff-Schwartz approach to pricing American options by Monte Carlo simulation, involves learning the optimal portfolio selection strategy on simulated Monte Carlo data. It shares with the LS framework intuitivity, simplicity and flexibility.
dc.description38 pages, 5 figures
dc.identifierhttps://arxiv.org/abs/math/0211383
dc.identifierhttp://arxiv.org/abs/math/0211383
dc.identifier.urihttp://salesiana.dossiersoluciones.com/handle/123456789/210128
dc.subjectProbability
dc.subjectOptimization and Control
dc.subjectComputational Finance
dc.subjectPricing of Securities
dc.subject65C05, 91B28, 49L20
dc.titleA Monte Carlo method for exponential hedging of contingent claims
dc.typetext

Files

Collections

arXiv