Variance optimal hedging for continuous time additive processes and applications
classification
💱 q-fin.PR
math.PR
keywords
additiveapplicationshedgingvariancealgorithmallowsclaimsclass
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For a large class of vanilla contingent claims, we establish an explicit F\"ollmer-Schweizer decomposition when the underlying is an exponential of an additive process. This allows to provide an efficient algorithm for solving the mean variance hedging problem. Applications to models derived from the electricity market are performed.
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