Abstract

In Chapters 5 and 8, the solution of the optimal investment problem was decomposed on two different problems: calculation of the optimal claim and calculation of a strategy to replicate the optimal claim. In this chapter, we discuss some aspects of replication of given claims. First, some possibilities are considered for replicating the desired claim by purchasing options. Second, an example is considered of an incomplete market with transactions costs and with nonpredictable volatility, when replication is replaced for rational superreplication.

Keywords

Hull Volatility Hedging 

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Copyright information

© Kluwer Academic Publishers 2002

Authors and Affiliations

  • Nikolai Dokuchaev
    • 1
    • 2
  1. 1.The Institute of Mathematics and MechanicsSt. Petersburg State UniversitySt. PetersburgRussia
  2. 2.Department of Mathematics and Computer ScienceThe University of West IndiesKingston 7Jamaica

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