Finance and Stochastics

, Volume 3, Issue 3, pp 251–273

Quantile hedging

  • Hans Föllmer
  • Peter Leukert

DOI: 10.1007/s007800050062

Cite this article as:
Föllmer, H. & Leukert, P. Finance Stochast (1999) 3: 251. doi:10.1007/s007800050062

Abstract.

In a complete financial market every contingent claim can be hedged perfectly. In an incomplete market it is possible to stay on the safe side by superhedging. But such strategies may require a large amount of initial capital. Here we study the question what an investor can do who is unwilling to spend that much, and who is ready to use a hedging strategy which succeeds with high probability.

Key words:Hedging, superhedging, Neyman Pearson lemma, stochastic volatility, value at risk 
JEL classification: G10, G12, G13, D81 
Mathematics Subject Classification (1991):60H30, 62F03, 62P05, 90A09 

Copyright information

© Springer-Verlag Berlin Heidelberg 1999

Authors and Affiliations

  • Hans Föllmer
    • 1
  • Peter Leukert
    • 1
  1. 1. Humboldt–Universität zu Berlin, Institut für Mathematik, Unter den Linden 6, D-10099 Berlin, Germany (e-mail: foellmer@mathematik.hu-berlin.de; leukert@mathematik.hu-berlin.de) DE