Dynamic conic hedging for competitiveness

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Title: Dynamic conic hedging for competitiveness
Authors: Madan, DB
Pistorius, M
Schoutens, W
Item Type: Journal Article
Abstract: The paper provides a new hedging methodology permitting systematic hedging choices with wide applications. Dynamic concave bid price, and convex ask price functionals from the recent literature are employed to construct new hedging strategies termed dynamic conic hedging. The primary focus of these strategies is to adopt positions maximizing a nonlinear conditional expectation expressed recursively as a concave current bid price for the one step ahead risk held or minimizing the convex current ask price for the risk promised. Risk management and hedging then have a new market value enhancing perspective different from the classical forms of risk mitigation, local variance minimization, or even expected utility maximization.
Issue Date: 10-Mar-2016
Date of Acceptance: 27-Feb-2016
URI: http://hdl.handle.net/10044/1/31828
DOI: http://dx.doi.org/10.1007/s11579-016-0164-x
ISSN: 1862-9679
Publisher: Springer Verlag
Start Page: 405
End Page: 439
Journal / Book Title: Mathematics and Financial Economics
Volume: 10
Issue: 4
Copyright Statement: © Springer-Verlag 2016. The final publication is available at Springer via http://dx.doi.org/10.1007/s11579-016-0164-x
Keywords: Social Sciences
Science & Technology
Physical Sciences
Business, Finance
Economics
Mathematics, Interdisciplinary Applications
Social Sciences, Mathematical Methods
Business & Economics
Mathematics
Mathematical Methods In Social Sciences
Static and semi static hedging
Nonlinear expectation
Variance gamma model
Distorted expectation
CONVEX RISK MEASURES
INCOMPLETE MARKETS
PORTFOLIO SELECTION
TRANSACTION COSTS
STATE VARIABLES
CONTINUOUS-TIME
DISCRETE-TIME
VALUATION
ARBITRAGE
OPTIONS
Mathematical Sciences
Publication Status: Published
Appears in Collections:Financial Mathematics
Mathematics
Faculty of Natural Sciences



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