Optimality of claims with fixed payoff structure
نویسنده
چکیده
We apply the concept of cost efficient claims to Lévy market models and find in an application to German stock prizes considerable potential savings the optimal payoffs provide. The magnitude of savings is related to the strength of the market trend. It is shown that the cost-efficient options also exhibit an improved behaviour concerning hedging errors. In the second part we introduce additional state dependent constraints and determine explicitly optimal claims satisfying these constraints. We give an extension of the classical Merton result on portfolio optimization to the case of state dependent payoffs and consider applications to several optimal hedging and quantile hedging problems.
منابع مشابه
Optimal claims with fixed payoff structure
Dybvig ? introduced the interesting problem of how to construct in the cheapest possible way a terminal wealth with desired distribution. This idea has induced a series of papers concerning generality, consequences and applications. As the optimized claims typically follow the trend in the market, they are not useful for investors who wish to use them to protect an existing portfolio. For this ...
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