Quantile hedging

Pricing and Hedging of Quantile Options in a Flexible Jump Diffusion Model

This paper proposes a Laplace-transform-based approach to price the fixed-strike quantile options as well as to calculate the associated hedging parameters (delta and gamma) under a hyperexponential jump diffusion model, which can be viewed as a generalization of the well-known Black–Scholes model and Kou’s double exponential jump diffusion model. By establishing a relationship between floating...

Quantile hedging on equity-linked life insurance contracts with transaction costs

This paper analyzes the application of quantile hedging on equity-linked life insurance contracts in the presence of transaction costs. Following the time-based replication strategy, we present the explicit expressions for the present values of expected hedging errors and transaction costs. The results are derived by using the adjusted hedging volatility σ̄ proposed by Leland. Furthermore, the e...

Quantile hedging for equity-linked contracts

We consider an equity-linked contract whose payoff depends on the lifetime of policy holder and the stock price. We provide best strategy for an insurance company assuming the limited capital for the hedging.

Quantile hedging for equity-linked life insurance contracts in a stochastic interest rate economy

Quantile Hedging for Defaultable Securities in an Incomplete Market - Proceedings ASTIN/AFIR 1999 - Tokyo, Japan

In this paper, we aim at 1. giving formulas of prices and replicating-strategies of defaultable securities(e.g., bonds, swaps, derivatives) in incomplete market, and 2. giving “solvable” examples of quantile hedging strategies in incomplete market. Considering an incomplete market that consists of tradable assets and an unhedgeable defaultable security, whose non-predictable default time has st...

N ov 2 00 8 Quantile hedging for an insider

In this paper we consider the problem of the quantile hedging from the point of view of a better informed agent acting on the market. The additional knowledge of the agent is modelled by a filtration initially enlarged by some random variable. By using equivalent martingale measures introduced in [1] and [2] we solve the problem for the complete case, by extending the results obtained in [4] to...