Mean-Variance Hedging in Large Financial Markets

Campi, Luciano

Campi, Luciano (2009), Mean-Variance Hedging in Large Financial Markets, Stochastic Analysis and Applications, 27, 6, p. 1129-1147. http://dx.doi.org/10.1080/07362990903259223

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Type

Article accepté pour publication ou publié

Date

2009

Journal name

Stochastic Analysis and Applications

Volume

Number

Publisher

Taylor & Francis

Pages

1129-1147

Abstract (EN)

We consider a mean-variance hedging (MVH) problem for an arbitrage-free large financial market, that is, a financial market with countably many risky assets modelled by a sequence of continuous semimartingales. By using the stochastic integration theory for a sequence of semimartingales developed in De Donno and Pratelli [6], we extend the results about change of numéraire and MVH of Gourieroux et al. [12] to this setting. We also consider, for all n ≥ 1, the market formed by the first n risky assets and study the solutions to the corresponding n-dimensional MVH problem and their behaviour when n tends to infinity.

Subjects / Keywords

Artificial extension method; Hedging; large financial market; Numéraire; Stochastic integral for a sequence of semimartingales

JEL

G15 - International Financial Markets