Optimal Hedging with Basis Risk

摘要: It often happens that options are written on underlying assets cannot be traded directly, but where a ‘closely related’ asset can traded. Rather than simply using the as proxy for option underlying, one should calculate some ‘best’ hedging strategy. The market is incomplete, and we address problem utility maximization approach. With exponential optimal strategy computed in reasonably explicit form methods of convex duality. In particular, perturbation analysis ideas Malliavin calculus gives modification to exact replication appropriate when highly, not perfectly, correlated.