A Quadratic Approach To Interest Rates Models In Incomplete Markets

Biagini, Francesca (2001): A Quadratic Approach To Interest Rates Models In Incomplete Markets. Workshop of the Mathematical Finance Research Project, Konstanz, Deutschland, 5. – 7. Oktober 2000. Kohlmann, Michael und Tang, Shanjian (Hrsg.): In: Mathematical Finance. Workshop of the Mathematical Finance Research Project, Konstanz, Germany, October 5–7, 2000, Basel: Birkhäuser. S. 89-98

Abstract

The aim of this paper is to apply the mean-variance hedging approach, originally formulated for risky assets, to interest rate models in presence of stochastic volatility.

In a HJM framework, we set a finite number of bonds such the volatility matrix is invertible and provide an explicit formula for the density of the variance-optimal measure which is independent by the chosen times of maturity.

Finally, we compare the mean-variance hedging approach to the local risk minimization one in the interest rate case.

• Dokumententyp: Konferenzbeitrag (Paper)
• Fakultät: Mathematik, Informatik und Statistik > Mathematik > Finanz- und Versicherungsmathematik
• Themengebiete: 500 Naturwissenschaften und Mathematik > 510 Mathematik
• Ort: Basel
• Sprache: Englisch