A Counterexample Concerning the Variance-Optimal Martingale Measure
Mathematical Finance, 2008, 18(2), 305-316
13 Pages Posted: 3 Jul 2006 Last revised: 22 Jun 2020
There are 2 versions of this paper
A Counterexample Concerning the Variance-Optimal Martingale Measure
A Counterexample Concerning the Variance-Optimal Martingale Measure
Date Written: October 16, 2006
Abstract
The present note addresses an open question concerning a sufficient characterization of the variance-optimal martingale measure. Denote by S the discounted price process of an asset and suppose that Q* is an equivalent martingale measure whose density is a multiple of 1 − \varphi S_T for some S-integrable process \varphi. We show that Q* does not necessarily coincide with the variance-optimal martingale measure, not even if \varphi S is a uniformly integrable Q*-martingale.
Keywords: variance-optimal martingale measure, duality, counterexample
JEL Classification: G11, G12, C61
Suggested Citation: Suggested Citation
Do you have a job opening that you would like to promote on SSRN?
Recommended Papers
-
Stochastic Volatility Models, Correlation, and the Q-Optimal Measure
-
On the Structure of General Mean-Variance Hedging Strategies
By Aleš Černý and Jan Kallsen
-
By Vicky Henderson, David G. Hobson, ...
-
Analytical Comparisons of Option Prices in Stochastic Volatility Models
-
Dynamic Programming and Mean-Variance Hedging in Discrete Time
By Aleš Černý
-
Optimal Continuous-Time Hedging with Leptokurtic Returns
By Aleš Černý
-
Optimal Continuous-Time Hedging with Leptokurtic Returns
By Aleš Černý
-
Explicit Representation of the Minimal Variance Portfolio in Markets Driven by Levy Processes
By Fred Espen Benth, Giulia Di Nunno, ...
-
Mean-Variance Hedging and Optimal Investment in Heston's Model with Correlation
By Aleš Černý and Jan Kallsen
-
Mean Variance Hedging and Optimal Investment in Heston's Model with Correlation
By Alea Cerný and Jan Kallsen
