Hedged Monte-Carlo: low variance derivative pricing with objective probabilities

DOI10.1016/S0378-4371(00)00554-9zbMath0971.91503arXivcond-mat/0008147MaRDI QIDQ1591779

D. Sestovic, Jean-Philippe Bouchaud, Marc Potters

Publication date: 9 January 2001

Published in: Physica A (Search for Journal in Brave)

Full work available at URL: https://arxiv.org/abs/cond-mat/0008147

zbMATH Keywords

financial risk reductionhistorical time seriesprice financial derivatives

Mathematics Subject Classification ID

Economic time series analysis (91B84) Derivative securities (option pricing, hedging, etc.) (91G20)

Related Items (18)

Option pricing and portfolio hedging under the mixed hedging strategy ⋮ Option pricing under mixed hedging strategy in time-changed mixed fractional Brownian model ⋮ Risk preference, option pricing and portfolio hedging with proportional transaction costs ⋮ ESTIMATING RESIDUAL HEDGING RISK WITH LEAST-SQUARES MONTE CARLO ⋮ A Nonintrusive Stratified Resampler for Regression Monte Carlo: Application to Solving Nonlinear Equations ⋮ Historical simulation approach to the estimation of stochastic discount factor models ⋮ The skewed multifractal random walk with applications to option smiles ⋮ Understanding option prices ⋮ Cross-hedging minimum return guarantees: basis and liquidity risks ⋮ Linear regression MDP scheme for discrete backward stochastic differential equations under general conditions ⋮ A non-Gaussian option pricing model with skew ⋮ Option pricing and hedging with minimum local expected shortfall ⋮ Option valuation and hedging using an asymmetric risk function: asymptotic optimality through fully nonlinear partial differential equations ⋮ Dynamic option hedging via stochastic model predictive control based on scenario simulation ⋮ A regression-based Monte Carlo method to solve backward stochastic differential equations ⋮ Option pricing under residual risk and imperfect hedging ⋮ A master equation approach to option pricing ⋮ A path integral way to option pricing

Cites Work

• The Pricing of Options and Corporate Liabilities
• Martingales and stochastic integrals in the theory of continuous trading
• Approximating random variables by stochastic integrals
• From the bird's eye to the microscope: A survey of new stylized facts of the intra-daily foreign exchange markets
• Pricing Risky Options Simply
• The Black-Scholes option pricing problem in mathematical finance: generalization and extensions for a large class of stochastic processes
• Some mathematical results in the pricing of American options
• On Quadratic Cost Criteria for Option Hedging
• Phenomenology of the interest rate curve
• Valuing American Options by Simulation: A Simple Least-Squares Approach
• Option pricing: A simplified approach
• Modelling financial time series using multifractal random walks
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