Title: On the Approximation of Random Variables by Stochastic Integrals with Respect to Semimartingales
Abstract: In this paper it is shown that the space of stochastic integrals w.r. to a special semimartingal is closed and hence every square integrable random variable admits a best approximation in this space. In terms of financial economics this means that for every contingent claim there exists a hedging strategy minimizing the expected square of net loss.
Keywords: stochastic integration, hedging, incomplete markets
JEL-Classification-Number: G11, G13
Creation-Date: April 1994
Unfortunately this paper is not available online. Please contact us to order a hardcopy.
SFB 303 Homepage
17.02.1998, © Webmaster