| Purdue Computational Finance Program | |
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Hedging Claims with Feedback Jumps in the Price Process
March 6, 2003 |
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Abstract:
We study a hedging and a pricing problem of general claims whose underlying stock price process is driven by a L-2 continuous martingale and a pure jump process. It involves the models with jumps where the arrival intensities have instantaneous feedback in the differentials. We show that under mild conditions, we can find an explicit price and hedging formula. A time change technique of Brownian motion plays a key role. |
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