The Tracking Error Rate of the Delta-Gamma Hedging Strategy

descriptionPublicationkeyboard_double_arrow_right Article , Other literature type 01 Jan 2009 France English Publisher:Elsevier BVJournal:SSRN Electronic Journal (eissn: 1556-5068,

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Authors: Gobet, Emmanuel; Makhlouf, Azmi;

doi: 10.2139/ssrn.1492126 , 10.1111/j.1467-9965.2010.00466.x

The Tracking Error Rate of the Delta-Gamma Hedging Strategy

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Abstract

We analyze the convergence rate of the quadratic tracking error, when a Delta‐Gamma hedging strategy is used at N discrete times. The fractional regularity of the payoff function plays a crucial role in the choice of the trading dates, in order to achieve optimal rates of convergence.

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France

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[MATH.MATH-PR]Mathematics [math]/Probability [math.PR], \(L_2\) convergence, 330, Derivative securities (option pricing, hedging, etc.), hedging strategies, fractional regularity, Applications of stochastic analysis (to PDEs, etc.), L2 convergence

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