On the Martingale Representation Theorem and Approximate Hedging a Contingent Claim in the Minimum Mean Square Deviation Criterion

VNU Journal of Science, Mathematics & Physics , Vol. 23, pp. 143-154, 2007

12 Pages Posted: 2 Aug 2009

See all articles by Nguyen Van Huu

Nguyen Van Huu

Hanoi National University of Education

Quan Hoang Vuong

Université Libre de Bruxelles (ULB) - Solvay Brussels School of Economics and Management; Phenikaa University

Date Written: December 15, 2007

Abstract

In this work we consider the problem of the approximate hedging of a contingent claim in minimum mean square deviation criterion. A theorem on martingale representation in the case of discrete time and an application of obtained result for semi-continous market model are given.

Keywords: Hedging, contingent claim, risk neutral martingale measure, martingale representation

JEL Classification: C00, C02, G12, G13

Suggested Citation

Huu, Nguyen Van and Vuong, Quan Hoang, On the Martingale Representation Theorem and Approximate Hedging a Contingent Claim in the Minimum Mean Square Deviation Criterion (December 15, 2007). VNU Journal of Science, Mathematics & Physics , Vol. 23, pp. 143-154, 2007, Available at SSRN: https://ssrn.com/abstract=1442385

Nguyen Van Huu

Hanoi National University of Education ( email )

136 Xuan Thuy-Cau Giay
Hanoi
Vietnam

Quan Hoang Vuong (Contact Author)

Université Libre de Bruxelles (ULB) - Solvay Brussels School of Economics and Management ( email )

ULB CP 145/01
21 Ave. F.D. Roosevelt
Brussels, Bruxelles 1050
Belgium
+32-2-6504864 (Phone)
+32-2-6504188 (Fax)

HOME PAGE: http://www.ceb-ulb.com/vuong-quan-hoang.html

Phenikaa University ( email )

To Huu road, Yen Nghia
Ha Dong district
Hanoi, Hanoi 100803
Vietnam

HOME PAGE: http://sites.google.com/site/vuongqh2019/

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