Hedge backtesting for model validation

Hedge backtesting for model validation

risk-1013-jackson-fig1

Pricing and hedging is easy, in theory. The existence of arbitrage-free prices is equivalent to the existence of martingale measures, and there are ways of constructing replication strategies via the martingale representation theorem and the Clark-Ocone formula (see, for example, Harrison & Pliska, 1981, and Musiela & Rutkowski, 2005). Arbitrage-free prices can also be obtained as solutions to certain partial differential equations (PDEs) (see, for example, Harrison & Pliska, 1981, and Black &

Only users who have a paid subscription or are part of a corporate subscription are able to print or copy content.

To access these options, along with all other subscription benefits, please contact info@risk.net or view our subscription options here: http://subscriptions.risk.net/subscribe

You are currently unable to copy this content. Please contact info@risk.net to find out more.

Sorry, our subscription options are not loading right now

Please try again later. Get in touch with our customer services team if this issue persists.

New to Risk.net? View our subscription options

You need to sign in to use this feature. If you don’t have a Risk.net account, please register for a trial.

Sign in
You are currently on corporate access.

To use this feature you will need an individual account. If you have one already please sign in.

Sign in.

Alternatively you can request an individual account here