Article ID: | iaor20002170 |
Country: | Germany |
Volume: | 50 |
Issue: | 2 |
Start Page Number: | 339 |
End Page Number: | 350 |
Publication Date: | Jan 1999 |
Journal: | Mathematical Methods of Operations Research (Heidelberg) |
Authors: | Runggaldier W.J., Frey R. |
We consider a market where the price of the risky asset follows a stochastic volatility model, but can be observed only at discrete random time points. We determine a local risk minimizing hedging strategy, assuming that the information of the agent is restricted to the observations of the price at its random jump times. Stochastic filtering also comes into play when computing the hedging strategy in the given situation of restricted information.