Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
10527359 | Stochastic Processes and their Applications | 2014 | 24 Pages |
Abstract
In the context of a locally risk-minimizing approach, the problem of hedging defaultable claims and their Föllmer-Schweizer decompositions are discussed in a structural model. This is done when the underlying process is a finite variation Lévy process and the claims pay a predetermined payout at maturity, contingent on no prior default. More precisely, in this particular framework, the locally risk-minimizing approach is carried out when the underlying process has jumps, the derivative is linked to a default event, and the probability measure is not necessarily risk-neutral.
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Physical Sciences and Engineering
Mathematics
Mathematics (General)
Authors
Ramin Okhrati, Alejandro Balbás, José Garrido,