Quadratic hedging problems for non-tradable assets
YANG Jian-qi1, ZHAO Shou-juan2
1. Institute of Computational Mathematics, Hunan University of Science and Engineering, Yongzhou 425100, China
2. Department of Mathematic of Xingxiang University, Xingxiang 453003, China
Abstract The paper introduces and solves the hedging problems of non-tradable assets. Based on financial market practice, the non-tradable assets hedging model is constructed. Three meanvariance and quadratic hedging objectives are introduced on jump-diffusion model. The optimal hedging strategies, which are formulated by observable variables in backward form are given by an auxiliary process and Hilbert projection theorem. Finally the effectivity of the hedging strategies is tested via Monte Carlo.
YANG Jian-qi, ZHAO Shou-juan. Quadratic hedging problems for non-tradable assets. Applied Mathematics A Journal of Chinese Universities, 2016, 31(1): 30-38.
