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Local Risk-Minimization for Change Point Models

  • Author / Creator
    JIANG, LONG
  • he main aim of this thesis lies in describing, as explicit as possible, the local-risk minimizing strategy for a change-point model. To this end, we analyze and investigate the mathematical structures of this model. The change-point model is a model that starts with a dynamic and switches to another dynamic immediately at some random time. This random time can represents the time of occurrence of an event that may affect the market and/or agents, such as the default of a firm, a catastrophic event, sudden adjustment of fiscal policies, etc. The most interesting feature of this random time lies in the fact that its behavior might not be seen through the public flow of information. This feature obliges us to enlarge the flow of information to include this random time. For this context, we develop the local-risk minimization and describe the optimal strategy using the public information. As applications of these results, we address the hedging problem for default sensitive contingent claims.

  • Subjects / Keywords
  • Graduation date
    2014-11
  • Type of Item
    Thesis
  • Degree
    Master of Science
  • DOI
    https://doi.org/10.7939/R3XD4W
  • License
    This thesis is made available by the University of Alberta Libraries with permission of the copyright owner solely for non-commercial purposes. This thesis, or any portion thereof, may not otherwise be copied or reproduced without the written consent of the copyright owner, except to the extent permitted by Canadian copyright law.
  • Language
    English
  • Institution
    University of Alberta
  • Degree level
    Master's
  • Department
    • Department of Mathematical and Statistical Sciences
  • Specialization
    • Mathematical Finance
  • Supervisor / co-supervisor and their department(s)
    • Choulli, Tahir
  • Examining committee members and their departments
    • Pass, Brentan
    • Frei, Christoph (Mathematical Finance and Stochastic Analysis)
    • Berger, Arno (Dynamical Systems and Probability Theory)
    • Choulli, Tahir (Mathematical Finance and Stochastic Analysis)
    • Mizera, Ivan (Statistics)