Journal of applied mathematics & informatics

The Korean Society for Computational and Applied Mathematics (한국전산응용수학회)
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OPTIMAL PARTIAL HEDGING USING COHERENT MEASURE OF RISK

  • Kim, Ju-Hong (Department of Mathematics, Sungshin Women's University)
  • Received : 2010.08.28
  • Accepted : 2011.03.01
  • Published : 2011.05.30
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Abstract

We show how the dynamic optimization problem with the capital constraint can be reduced to the problem to find an optimal modified claim $\tilde{\psi}H$ where $\tilde{\psi}$ is a randomized test in the static problem. Coherent risk measure is used as risk measure in the $L^{\infty}$ random variable spaces. The paper is written in expository style to some degree. We use an average risk of measure(AVaR), which is a special coherent risk measure, to see how to hedge the modified claim in a complete market model.

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Acknowledgement

Supported by : Sungshin Women's University

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