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Title: Three essays on pricing and hedging in incomplete markets
Author: Chen, Dan
ISNI:       0000 0004 2711 7006
Awarding Body: London School of Economics and Political Science (LSE)
Current Institution: London School of Economics and Political Science (University of London)
Date of Award: 2011
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The thesis focuses on valuation and hedging problems when the market is incomplete. The Örst essay considers the quadratic hedging strategy. We propose a generalized quadratic hedging strategy which can balance a short-term risk (additional cost) with a long-term risk (hedging errors). The traditional quadratic hedging strategies, i.e. self-Önancing strategy and risk-minimization strategy, can be seen as special cases of the generalized quadratic hedging strategy. This is applied to the insurance derivatives market. The second essay compares parametric and nonparametric measure-changing techniques. The essay discusses three pricing approaches: pricing via Esscher measure, via calibration and via nonparametric risk-neutral density; and empirically compares the performance of the three approaches in the metal futures markets. The last essay establishes the concept of stochastic volatility of volatility and proposes several estimation methods.
Supervisor: Not available Sponsor: Not available
Qualification Name: Thesis (Ph.D.) Qualification Level: Doctoral
EThOS ID:  DOI: Not available
Keywords: HB Economic Theory