Abstract
We study a hedging and pricing problem of a model where the price process of a risky asset has jumps with instantaneous feedback from the most recent asset price. We model these jumps with a doubly stochastic Poisson process with an intensity function depending on the current price. We find a closed form expression of the local risk minimization strategy using Follmer and Schweizer decomposition and Feynman-Kac type integrodifferential equation. The possibility that the jumps depend on the most recent price is new for this type of model.
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
