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VaR-Optimal Risk Management in Regime-Switching Jump-Diffusion Models
Department of Economics and Finance, University of Roma Tor Vergata, Roma, Italy
- 1 Department of Economics and Finance, University of Roma Tor Vergata, Roma, Italy
Journal of Mathematical Finance·Volume 03 (2013)·Pages 103–109·Published 26 February 2013·DOI10.4236/jmf.2013.31009
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Abstract
In this paper we study a classical option-based portfolio strategy which minimizes the Value-at-Risk of the hedged position in a continuous time, regime-switching jump-diffusion market, by using Fourier Transform methods. However, the analysis of this hedging strategy, as well as the computational technique for its implementation, is fairly general, i.e . it can be applied to any dynamical model for which Fourier transform methods are viable.
KeywordsRegime Switching Jump-Diffusion ModelsValue at RiskRisk ManagementFourier Transform Methods
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