Abstract
The paper introduces and studies hedging for game (Israeli) style extension of swing options considered as multiple exercise derivatives. Assuming that the underlying security can be traded without restrictions, we derive a formula for valuation of multiple exercise options via classical hedging arguments. Introducing the notion of the shortfall risk for such options we study also partial hedging which leads to minimization of this risk.
Original language | English |
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Pages (from-to) | 447-474 |
Number of pages | 28 |
Journal | Mathematical Finance |
Volume | 21 |
Issue number | 3 |
DOIs | |
Publication status | Published - Jul 2011 |
Externally published | Yes |
Keywords
- Game options
- Hedging
- Multiple exercise derivatives
- Shortfall risk