A model-free approach to delta hedging



2500


4000

3500

3000

50           100           150           200           250


-200


1200

50           100           150           200           250


(a) Underlying asset: daily values during the last (b) Option: daily values during the last 223 days,

inria-00457222, version 1 - 16 Feb 2010


223 days, and trend (- -)

(c) Daily interest rate r

Figure 2: Example 1: CFU9PY3500


and trend (- -)

0            50           100           150           200           250

(d) ∆ tracking


[3] Black F., Scholes M., The pricing of options and corporate liabilities,
J. Political Economy, 3, 637-654, 1973.

[4] Cartier P., Perrin Y., Integration over finite sets, in Nonstandard
Analysis in Practice
, F. & M. Diener (Eds), Springer, 1995, pp. 195-204.

[5] Cont R., Tankov P., Financial Modelling with Jump Processes, Chap-
man & Hall/CRC, 2004.

[6] Derman, E., Taleb N., The illusion of dynamic delta replication, Quan-
titative Finance
, 5, 323-326, 2005.

[7] El Karoui N., Jeanbianc-Picque M., Shreve S., Robustness of the
Black and Scholes formula,
Math. Finance, 8, 93-126, 1998.

[8] Fliess M., Join C., Commande sans mod`ele et commande a`
modèle restreint,
e-STA, 5 (n° 4), 1-23, 2008, (available at
http://hal.inria.fr/inria-00288107/en/).

[9] Fliess M., Join C., A mathematical proof of the existence of trends in fi-
nancial time series
, in Systems Theory: Modeling, Analysis and Control, A.



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