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A Model with Interacting Assets Driven by Poisson Processes 

Authors: S. Albeverio a;  M. Schmitz b;  V. Steblovskaya c; K. Wallbaum d
Affiliations:   a Institut fuumlr Angewandte Mathematik, Universitaumlt Bonn, Bonn, Germany
b Tillinghast Tower Perrin, Koumlln, Germany
c Department of Mathematical Science, Bentley College, Waltham, Massachusetts, USA
d Allianz Lebensversicherungs AG, Stuttgart, Germany
DOI: 10.1080/07362990500397806
Publication Frequency: 6 issues per year
Published in: journal Stochastic Analysis and Applications, Volume 24, Issue 1 March 2006 , pages 241 - 261
Formats available: HTML (English) : PDF (English)
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Abstract

An extension with noise given by Poisson processes of a model of financial market with several assets that are interacting, i.e., influencing each other (even in the absence of noise) is given. We present explicit formulae for the stock price process as well as for the prices of European multi-asset contingent claims based on a residual risk minimization approach. We also provide an explicit hedging formula.
Keywords: Hedging; Incomplete markets; Interacting assets; Option pricing; Poisson processes; Residual risk; Self-financing strategies
Mathematics Subject Classification: 60H40; 60J65; 60J75; 62P05; 91B24
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