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- Title
On a Robustness of Quantile Hedging: Complete Market's Case.
- Authors
Sekine, Jun
- Abstract
Recently, Föllmer and Leukert have introduced the notion of quantile-hedging. In their paper [3], three types of quantile-hedging-problems in particular have been formulated: i.e. problem of maximizing the probability of success problem of minimizing the cost for a given probability of success problem of minimizing 'a downside-risk' and reduced to certain simple statistical-tests. In this article, under an elementary complete-market with unknown (to the investor) constant drift of the risky-asset setting, we will measure a certain robustness of quantile-hedging against the uncertainty of the drift. We will discriminate the robustness by whether the associated statistical-test has uniformly the most powerful test function against alternatives. We claim that the solution of 3 is robust if the sign of the drift is known, the solution of 2, not robust, and the solution of 1, robust to some extent, which is affected by the shape of the contingent claim.
- Subjects
ROBUST control; HEDGING (Finance); MARKETING research; PROBABILITY theory; INVESTORS; FINANCIAL market reaction
- Publication
Asia-Pacific Financial Markets, 1999, Vol 6, Issue 2, p195
- ISSN
1387-2834
- Publication type
Article
- DOI
10.1023/A:1010053300172