The Mathematical Institute, University of Oxford, Eprints Archive

On sensitivities in utility-based hedging and parameter uncertainty

Azar, Ghady (2014) On sensitivities in utility-based hedging and parameter uncertainty. Masters thesis, Oxford University.

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Abstract

We study utility-based hedging and indifference pricing in a basis risk model where we wish to hedge a claim on a non-traded asset by trading a correlated traded asset. We examine the sensitivities of such trading strategies to relevant model parameters and we give first-order approximation formulae of the partial derivatives of the indifference price and hedging strategy with respect to these parameters. We also study the effect of the drift parameter mis-estimation on the performance of the optimal strategy.

Item Type:Thesis (Masters)
Subjects:H - N > Mathematics education
Research Groups:Mathematical and Computational Finance Group
ID Code:1843
Deposited By: Laura Auger
Deposited On:07 Aug 2014 07:03
Last Modified:29 May 2015 19:32

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