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Meanvariance hedging for stochastic volatility models
 Mathematical Finance
"... Abstract. In this paper we discuss the tractability of stochastic volatility models for pricing and hedging options with the meanvariance hedging approach. We characterize the varianceoptimal measure as the solution of an equation between Doleans exponentials: explicit examples include both models ..."
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Abstract. In this paper we discuss the tractability of stochastic volatility models for pricing and hedging options with the meanvariance hedging approach. We characterize the varianceoptimal measure as the solution of an equation between Doleans exponentials: explicit examples include both models where volatility solves a diffusion equation, and models where it follows a jump process. We further discuss the closedness of the space of strategies.
On the structure of general . . .
, 2007
"... We provide a new characterization of meanvariance hedging strategies in a general semimartingale market. The key point is the introduction of a new probability measure P ⋆ which turns the dynamic asset allocation problem into a myopic one. The minimal martingale measure relative to P ⋆ coincides wi ..."
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We provide a new characterization of meanvariance hedging strategies in a general semimartingale market. The key point is the introduction of a new probability measure P ⋆ which turns the dynamic asset allocation problem into a myopic one. The minimal martingale measure relative to P ⋆ coincides with the varianceoptimal martingale measure relative to the original probability measure P.