A signature-kernel and operator-valued-kernel framework for hedging is proved to have a unique global minimizer with an explicit formula, and it approximates the delta hedge on a GBM example.
The Signature of a Rough Path: Uniqueness
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abstract
In the context of controlled differential equations, the signature is the exponential function on paths. B. Hambly and T. Lyons proved that the signature of a bounded variation path is trivial if and only if the path is tree-like. We extend Hambly-Lyons' result and their notion of tree-like paths to the setting of weakly geometric rough paths in a Banach space. At the heart of our approach is a new definition for reduced path and a lemma identifying the reduced path group with the space of signatures.
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2025 1verdicts
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Rough kernel hedging
A signature-kernel and operator-valued-kernel framework for hedging is proved to have a unique global minimizer with an explicit formula, and it approximates the delta hedge on a GBM example.