Information on jump sizes and hedging

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We study a hedging problem in a market where traders have various levels of information. The exclusive information available only to informed traders is modelled by a diffusion process rather than discrete arrivals of new information. The asset price follows a jump-diffusion process and an information process affects jump sizes of the asset price. We find the local risk minimization hedging strategy of informed traders. Numerical examples as well as their comparison with the Black-Scholes strategy are provided via Monte Carlo.
Publisher
TAYLOR & FRANCIS LTD
Issue Date
2014-11
Language
English
Article Type
Article
Citation

STOCHASTICS-AN INTERNATIONAL JOURNAL OF PROBABILITY AND STOCHASTIC PROCESSES, v.86, no.6, pp.889 - 905

ISSN
1744-2508
DOI
10.1080/17442508.2014.895356
URI
http://hdl.handle.net/10203/194660
Appears in Collection
MA-Journal Papers(저널논문)
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