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Performance of hedging strategies in interval models

Berend Roorda, Jacob Engwerda, Johannes M. Schumacher (2005)

Kybernetika

For a proper assessment of risks associated with the trading of derivatives, the performance of hedging strategies should be evaluated not only in the context of the idealized model that has served as the basis of strategy development, but also in the context of other models. In this paper we consider the class of so-called interval models as a possible testing ground. In the context of such models the fair price of a derivative contract is not uniquely determined and we characterize the interval...

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