The martingale method of shortfall risk minimization in a discrete time market
Volume 39 / 2012
Applicationes Mathematicae 39 (2012), 413-424
MSC: Primary 91G20; Secondary 91B30.
DOI: 10.4064/am39-4-2
Abstract
The shortfall risk minimization problem for the investor who hedges a contingent claim is studied. It is shown that in case the nonnegativity of the final wealth is not imposed, the optimal strategy in a finite market model is obtained by super-hedging a contingent claim connected with a martingale measure which is a solution of an auxiliary maximization problem.
