L 2 -approximating Pricing under Restricted Information

L 2 -approximating Pricing under Restricted Information We consider the mean-variance hedging problem under partial information in the case where the flow of observable events does not contain the full information on the underlying asset price process. We introduce a certain type martingale equation and characterize the optimal strategy in terms of the solution of this equation. We give relations between this equation and backward stochastic differential equations for the value process of the problem. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Applied Mathematics and Optimization Springer Journals

L 2 -approximating Pricing under Restricted Information

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Publisher
Springer-Verlag
Copyright
Copyright © 2009 by Springer Science+Business Media, LLC
Subject
Mathematics; Numerical and Computational Methods ; Mathematical Methods in Physics; Mathematical and Computational Physics; Systems Theory, Control; Calculus of Variations and Optimal Control; Optimization
ISSN
0095-4616
eISSN
1432-0606
D.O.I.
10.1007/s00245-009-9067-z
Publisher site
See Article on Publisher Site

Abstract

We consider the mean-variance hedging problem under partial information in the case where the flow of observable events does not contain the full information on the underlying asset price process. We introduce a certain type martingale equation and characterize the optimal strategy in terms of the solution of this equation. We give relations between this equation and backward stochastic differential equations for the value process of the problem.

Journal

Applied Mathematics and OptimizationSpringer Journals

Published: Aug 1, 2009

References

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