Cooperative Hedging in Incomplete Markets

Abstract

The problem of (partial) hedging contingent claims for a single agent is well studied. This paper studies the problem for the multiagent case in incomplete markets. For this case, a cooperative hedging game is posed as follows: First, all agents contribute some money and collect the money together as the initial total capital, then invest the initial total capital in a trading strategy, and, finally, divide the terminal wealth of the trading strategy and each of them gets a part. We give a characterization of the optimal cooperative hedging strategy and prove that the core of the cooperative hedging game, as a cooperative game with side payment, is nonempty.     

Existence of <Emphasis Type="Italic">g</Emphasis><Superscript>1</Superscript><Subscript><Emphasis Type="Italic">g</Emphasis>–2</Subscript>’s on a double covering of a hyperelliptic curve

Abstract Let X be a non–hyperelliptic curve of genus g which is a double covering of a hyperelliptic curve C of genus h. In this paper, we prove that, if h≥ 3 and g≥ 4h+5, then X admits a complete, base point free g¹_g–2. Moreover, if h=3, this result holds under the mild condition g≥ 4h+3=15. Keywords: Double covering of hyperelliptic curves, Pencil of degree g–2 Mathematics Subject Classification (2000:) 14H30, 14H45     

All (k;g)‐cages are k‐edge‐connected

A (k;g)‐cage is a k‐regular graph with girth g and with the least possible number of vertices. In this paper, we prove that (k;g)‐cages are k‐edge‐connected if g is even. Earlier, Wang, Xu, and Wang proved that (k;g)‐cages are k‐edge‐connected if g is odd. Combining our results, we conclude that the (k;g)‐cages are k‐edge‐connected. © 2005 Wiley Periodicals, Inc. J Graph Theory 48: 219–227, 2005     

Mean-variance Hedging for Pricing European-type Contingent Claims with Transaction Costs

In this paper,a European-type contingent claim pricing problem with transaction costs is considered by a mean-variance hedging argument.The investor has to pay transaction costs which areproportional to the amount of stock transacted.The writer‘‘s hedging object is to minimize the hedgingrisk,defined as the variance of hedging error at expiration,with a proper expected excess return level.At first, we consider the mean-variance hedging problem:for initial hedging wealth f,maximizing the excess expected return under the minimum hedging risk level V0.On the other hand,we consider a mean-variance portfolio problem,which is to maximize the expected return with initial wealth 0 under the same risk level V0.The minimum initial hedging wealth f,which can offset the difference of the maximum expected return of these two problems,is the writer‘s price.     

On meromorphic solutions of <Emphasis Type="Italic">f</Emphasis><Superscript>2</Superscript> + <Emphasis Type="Italic">g</Emphasis><Superscript>2</Superscript> = 1

We show that meromorphic solutions f, g of f ² + g ² = 1 in C² must be constant, if f _z2 and g _z1 have the same zeros (counting multiplicities). We also apply the result to characterize meromorphic solutions of certain nonlinear partial differential equations.     

Approximation of the inverse <Emphasis Type="Italic">G</Emphasis>-frame operator

In this paper, we introduce the concept of (strong) projection method for g-frames which works for all conditional g-Riesz frames. We also derive a method for approximation of the inverse g-frame operator which is efficient for all g-frames. We show how the inverse of g-frame operator can be approximated as close as we like using finite-dimensional linear algebra.     

Fusion frames and <Emphasis Type="Italic">G</Emphasis>-frames in Banach spaces

Fusion frames and g-frames in Hilbert spaces are generalizations of frames, and frames were extended to Banach spaces. In this article we introduce fusion frames, g-frames, Banach g-frames in Banach spaces and we show that they share many useful properties with their corresponding notions in Hilbert spaces. We also show that g-frames, fusion frames and Banach g-frames are stable under small perturbations and invertible operators.     

Orthogonal group divisible designs of type hn for h ≤ 6

For the existence problem of OGDDs of type g^u, Colbourn and Gibbons settled it with few possible exceptions for each group size g. In this article, we will completely settle it for g ≤ 6. © 2006 Wiley Periodicals, Inc. J Combin Designs     

An application of <Emphasis Type="Italic">H</Emphasis>-differentiability to nonnegative and unrestricted generalized complementarity problems

This paper deals with nonnegative nonsmooth generalized complementarity problem, denoted by GCP(f,g). Starting with H-differentiable functions f and g, we describe H-differentials of some GCP functions and their merit functions. We show how, under appropriate conditions on H-differentials of f and g, minimizing a merit function corresponding to f and g leads to a solution of the generalized complementarity problem. Moreover, we generalize the concepts of monotonicity, P ₀-property and their variants for functions and use them to establish some conditions to get a solution for generalized complementarity problem. Our results are generalizations of such results for nonlinear complementarity problem when the underlying functions are C ¹, semismooth, and locally Lipschitzian.     

Cages—a survey

We discuss the problem of finding smallest graphs of given girth g and valency v ((v, g)-cages). All known (v, g)-cages are given. Different variations of the cage problem are also discussed.     

A Property of <Emphasis Type="Italic">g</Emphasis>-Expectation

This paper proves that, under the hypothesis g(t, 0, 0) ≡ 0 and some natural assumptions, the generator g of a backward stochastic differential equation can be uniquely determined by the corresponding g-expectations with all terminal conditions. The main result of this paper also confirms and extends Peng Shige‘s conjecture.     

Group‐divisible designs with block size k having k + 1 groups,for k = 4, 5

We investigate the spectrum for k‐GDDs having k + 1 groups, where k = 4 or 5. We take advantage of new constructions introduced by R. S. Rees (Two new direct product‐type constructions for resolvable group‐divisible designs, J Combin Designs, 1 (1993), 15–26) to construct many new designs. For example, we show that a resolvable 4‐GDD of type g⁵ exists if and only if g ≡ 0 mod 12 and that a resolvable 5‐GDD of type g⁶ exists if and only if g ≡ 0 mod 20. We also show that a 4‐GDD of type g⁴m¹ exists (with m > 0) if and only if g ≡ m ≡ 0 mod 3 and 0 < m ≤ 3g/2, except possibly when (g,m) = (9,3) or (18,6), and that a 5‐GDD of type g⁵m¹ exists (with m > 0) if and only if g ≡ m ≡ 0 mod 4 and 0 < m ≤ 4g/3, with 32 possible exceptions. © 2000 John Wiley & Sons, Inc. J Combin Designs 8: 363–386, 2000     

On the functional equation <Emphasis Type="Italic">Af</Emphasis><Superscript>2</Superscript> + <Emphasis Type="Italic">Bg</Emphasis><Superscript>2</Superscript> = 1 on the field of complex <Emphasis Type="Italic">p</Emphasis>-adic numbers

For a fixed prime p, let C _p denote the complex p-adic numbers. For polynomials A, B ε C p [x] we consider decompositions A (x) f ² (x) + B (x) g ² (x) = 1 of entire functions f, g on C p and try to improve an impossibility result due to A. Boutabaa concerning transcendental f, g. We also provide a new proof of a p-adic diophantic statement due to D. N. Clark, which is an important ingredient of Boutabaa’s method.     

A note on convergence of an approximate hedging portfolio with liquidity risk

When the underlying asset price depends on activities of traders, hedging errors include costs due to the illiquidity of the underlying asset and the size of this cost can be substantial. Cetin et al. (2004), Liquidity risk and arbitrage pricing theory, Finance and Stochastics, 8(3), 311-341, proposed a hedging strategy that approximates the classical Black–Scholes hedging strategy and produces zero liquidity costs. Here, we compute the rate of convergence of the final value of this hedging portfolio to the option payoff in case of a European call option; i.e. we see how fast its hedging error converges to zero. The hedging strategy studied here is meaningful due to its simple liquidity cost structure and its smoothness relative to the classical Black–Scholes delta.     

Generalization of a theorem of Erdős and Rényi on Sidon sequences

Erd?s and Rényi claimed and Vu proved that for all h ≥ 2 and for all ? > 0, there exists g = g_h(?) and a sequence of integers A such that the number of ordered representations of any number as a sum of h elements of A is bounded by g, and such that |A ∩ [1,x]| ? x^1/h‐?. We give two new proofs of this result. The first one consists of an explicit construction of such a sequence. The second one is probabilistic and shows the existence of such a g that satisfies g_h(?) ? ?^?1, improving the bound g_h(?) ? ?^?h+1 obtained by Vu. Finally we use the “alteration method” to get a better bound for g₃(?), obtaining a more precise estimate for the growth of B₃[g] sequences. © 2010 Wiley Periodicals, Inc. Random Struct. Alg., 2010     

The spectrum of (<Emphasis Type="Italic">gv</Emphasis>, <Emphasis Type="Italic">g</Emphasis>, 3, λ)-DF in <Emphasis Type="Italic">Z</Emphasis><Subscript><Emphasis Type="Italic">gv</Emphasis></Subscript>

In this paper, the necessary and sufficient conditions for the existence of a (gv, g, 3, λ)-difference family in Z _gv are established. As a consequence, the existence spectrum of a cyclic (3, λ)-GDD of type g ^v without short orbits is determined. This work was supported by National Natural Science Foundation of China (Grants Nos. 10771013, 10831002)     

Edge‐partitions of planar graphs and their game coloring numbers

Let G be a planar graph and let g(G) and Δ(G) be its girth and maximum degree, respectively. We show that G has an edge‐partition into a forest and a subgraph H so that (i) Δ(H) ≤ 4 if g(G) ≥ 5; (ii) Δ(H) ≤ 2 if g(G) ≥ 7; (iii) Δ(H)≤ 1 if g(G) ≥ 11; (iv) Δ(H) ≤ 7 if G does not contain 4‐cycles (though it may contain 3‐cycles). These results are applied to find the following upper bounds for the game coloring number col_g(G) of a planar graph G: (i) col_g(G) ≤ 8 if g(G) ≥ 5; (ii) col_g(G)≤ 6 if g(G) ≥ 7; (iii) col_g(G) ≤ 5 if g(G) ≥ 11; (iv) col_g(G) ≤ 11 if G does not contain 4‐cycles (though it may contain 3‐cycles). © 2002 Wiley Periodicals, Inc. J Graph Theory 41: 307–317, 2002     

Cooperative hedging with a higher interest rate for borrowing

The paper studies the cooperative hedging problem of contingent claims in an incomplete financial market. Firstly we give the characterization of the optimal cooperative hedging strategy for the Black-Scholes model and the Volatility Jump model explicitly, then we consider the problem of cooperative hedging for the multi-agent case in a market with a higher borrowing interest rate. By the results of concave and linear backward stochastic differential equations, we give the optimal cooperative hedging strategy in our model.     

K‐linked graphs with girth condition

Recently, Mader [ 7 ] proved that every 2k‐connected graph with girth g(G) sufficiently large is k‐linked. We show here that g(G ≥ 11 will do unless k = 4,5. If k = 4,5, then g(G) ≥ 19 will do. © 2003 Wiley Periodicals, Inc. J Graph Theory 45: 48–50, 2004     

Topological rigidity of algebraic ℙ<Subscript>3</Subscript>-bundles over curves

A projective algebraic surface which is homeomorphic to a ruled surface over a curve of genus g≥1 is itself a ruled surface over a curve of genus g. In this note, we prove the analogous result for projective algebraic manifolds of dimension 4 in the case g≥2. Received: August 30, 2001; in final form: April 12, 2002?Published online: March 12, 2003