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Pricing and Hedging Techniques in Incomplete Markets: Mean-Variance Hedging and Risk Minimization

Dr. Yinglin Zhang


Schedule and Venue

Seminar

 

Wed 16-18

First seminar: Wednesday 21th April



Pre-registration is mandatory via email to jyinglin.zhang@gmail.com including your name, student ID, study field and Studienordnung. The seminar will be held remotely. Further information will be announced by email shortly before the first session.


Seminar Description

Among numerous techniques for pricing and hedging in incomplete markets, this seminar shows Mean-Variance Hedging and Risk Minimization approaches, both based on a quadratic condition and on the consequent orthogonal
projection of semimartingales. After an introduction of semimartingales, pricing and hedging problem by using these techniques is firstly formulated for a single contingent claim, then extended to a multidimensional setting and to payment streams.


References

  • Philip E. Protter, Stochastic Integration and Differential Equations (Springer, 2005). Chapters:
    • II. Semimartingales and Stochastic Integrals
    • III. Semimartingales and Decomposable Processes
    • IV. General Stochastic Integration and Local Times
  • M. Schweizer, A guided tour through quadratic hedging approaches (In Option Pricing, Interest Rates and Risk Management, pages 538-574, Cambridge University Press, 2001)
  • M. Schweizer, Local risk-minimization for multidimensional assets and payment streams (Banach Center Publications, 83:213-229, 2008)

For whom is this course?

Target Participants: Students of the Master in Mathematics or in Financial and Insurance Mathematics.

Pre-requisites: Probability Theory, Financial Mathematics I+II.

Applicable credits: 3 ECTS