TITLE:
The Optimal Hedge Ratio in Option Pricing: The Case of Exponentially Truncated Lévy Stable Distribution
AUTHORS:
Gigel Busca, Emmanuel Haven, Franck Jovanovic, Christophe Schinckus
KEYWORDS:
Hedge Ratio, Lévy Stable Distribution, Exponentially Truncated Distribution, Econophysics
JOURNAL NAME:
Theoretical Economics Letters,
Vol.4 No.9,
November
21,
2014
ABSTRACT: In financial option pricing, the stable
Lévy framework is a problematic issue because of its (theoretical) infinite
invariance. This paper deals with the integration of these processes into
option pricing by defining the minimal theoretical condition required for an
optimal risk hedging based on a stable Lévy framework with an exponentially
truncated distribution.