$L^2$-approximating pricing under restricted information

Details $L^2$-approximating pricing under restricted information $L^2$-approximating pricing under restricted information

2007-08-30

arxiv.org/abs/0708.4095v1

Economy

Quantitative Finance

Pricing of Securities

Scientific paper

We consider the mean-variance hedging problem under partial information in the case where the flow of observable events does not contain the full information on the underlying asset price process. We introduce a martingale equation of a new type and characterize the optimal strategy in terms of the solution of this equation. We give relations between this equation and backward stochastic differential equations for the value process of the problem.

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