Asymptotic analysis of utility-based hedging strategies for small number of contingent claims |
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| Authors: | D. Kramkov M. Sǐrbu |
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| Affiliation: | 1. Department of Mathematical Sciences, Carnegie Mellon University, 5000 Forbes Avenue, Pittsburgh, PA, 15213-3890, United States;2. Department of Mathematics, Columbia University, 2990 Broadway, New York, NY, 10027, United States |
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| Abstract: | We study the linear approximation of utility-based hedging strategies for small number of contingent claims. We show that this approximation is actually a mean-variance hedging strategy under an appropriate choice of a numéraire and a risk-neutral probability. In contrast to previous studies, we work in the general framework of a semimartingale financial model and a utility function defined on the positive real line. |
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| Keywords: | 90A09 90A10 90C26 |
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