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On the Convergence of Higher Order Hedging Schemes: The Delta-Gamma Case

Wiktorsson, Magnus LU and Brodén, Mats LU (2011) In SIAM Journal on Financial Mathematics 2. p.55-78
Abstract
Hedging errors induced by discrete rebalancing of the hedge portfolio of a delta-gamma hedging strategy are investigated. The rate of convergence of the expected squared hedging error as the number of adjustments of the hedge portfolio goes to infinity is analyzed. It is found that the delta-gamma strategy produces higher convergence rates than the usual delta strategy.
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author
organization
publishing date
type
Contribution to journal
publication status
published
subject
keywords
rate of convergence, discrete time hedging, delta-gamma hedging
in
SIAM Journal on Financial Mathematics
volume
2
pages
55 - 78
publisher
SIAM
external identifiers
  • scopus:84871069624
ISSN
1945-497X
DOI
10.1137/090779905
language
English
LU publication?
yes
id
68ac41f3-e748-47f8-8fb9-7da89bdaa5eb (old id 1784969)
date added to LUP
2011-08-19 16:54:03
date last changed
2017-02-08 13:46:50
@article{68ac41f3-e748-47f8-8fb9-7da89bdaa5eb,
  abstract     = {Hedging errors induced by discrete rebalancing of the hedge portfolio of a delta-gamma hedging strategy are investigated. The rate of convergence of the expected squared hedging error as the number of adjustments of the hedge portfolio goes to infinity is analyzed. It is found that the delta-gamma strategy produces higher convergence rates than the usual delta strategy.},
  author       = {Wiktorsson, Magnus and Brodén, Mats},
  issn         = {1945-497X},
  keyword      = {rate of convergence,discrete time hedging,delta-gamma hedging},
  language     = {eng},
  pages        = {55--78},
  publisher    = {SIAM},
  series       = {SIAM Journal on Financial Mathematics},
  title        = {On the Convergence of Higher Order Hedging Schemes: The Delta-Gamma Case},
  url          = {http://dx.doi.org/10.1137/090779905},
  volume       = {2},
  year         = {2011},
}