Variance optimal hedging for exponential of additive processes and applications

Stephane GOUTTE, Francesco RUSSO, NAdia OUDJANE

For a large class of vanilla contingent claims, we establish an explicit Föllmer–Schweizer decomposition when the underlying is an exponential of an additive process. This allows to provide an efficient algorithm for solving the mean variance hedging problem. Applications to models derived from the electricity market are performed.

Publication type: 
Scientific Article
Date de parution: 
Stochastics An International Journal of Probability and Stochastic Processes