Resource title

How to Avoid a Hedging Bias

Resource image

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Resource description

In this paper, the effects of so-called model misspecification and the effects of dropping the assumption that continuous rebalancing is possible are examined. Strategies which are robust if applied continuously fail to be robust if applied in discrete time. Therefore, the hedging bias which originates from the effects of time-discretising strategies is analysed. It turns out that a systematic hedging bias can only be avoided if a discrete-time hedging model is used. It is shown how the robustness property for convex payoffs is recovered while at the same time the hedging bias is avoided.

Resource author

Antje Dudenhausen

Resource publisher

Resource publish date

Resource language

eng

Resource content type

text/html

Resource resource URL

http://hdl.handle.net/10419/22855

Resource license

Adapt according to the presented license agreement and reference the original author.