Abstract
In a general incomplete model of a financial market we hedge contingent claims by using trading strategies with a small riskyness and consider additional cost which can come, e. g., from greater interests for borrowing and taxes on wealth. The explicit form of the optimal strategy minimizing locally riskyness (in Schweizer’s sense) and the associated price of the contingent claim is determined in the Markovian case, first for a small investor, and then for a greater investor who influences the stock price.
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Buckdahn, R. (1995). Backward Stochastic Differential Equations. Option Hedging under Additional Cost. In: Bolthausen, E., Dozzi, M., Russo, F. (eds) Seminar on Stochastic Analysis, Random Fields and Applications. Progress in Probability, vol 36. Birkhäuser, Basel. https://doi.org/10.1007/978-3-0348-7026-9_21
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DOI: https://doi.org/10.1007/978-3-0348-7026-9_21
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