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Quantile hedging

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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.

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Authors and Affiliations

  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

    Hans Föllmer & Peter Leukert

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  1. Hans Föllmer
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  2. Peter Leukert
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Manuscript received: January 1998; final version received: August 1998

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Föllmer, H., Leukert, P. Quantile hedging. Finance Stochast 3, 251–273 (1999). https://doi.org/10.1007/s007800050062

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  • DOI: https://doi.org/10.1007/s007800050062

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