Delta Hedging in Financial Engineering: Towards a Model-Free Approach

Michel Fliess 1, 2 Cédric Join 1, 3
1 ALIEN - Algebra for Digital Identification and Estimation
Inria Lille - Nord Europe, Inria Saclay - Ile de France, Ecole Centrale de Lille, Polytechnique - X, CNRS - Centre National de la Recherche Scientifique : UMR8146
Abstract : Delta hedging, which plays a crucial rôle in modern financial engineering, is a tracking control design for a "risk-free" management. We utilize the existence of trends in financial time series (Fliess M., Join C.: A mathematical proof of the existence of trends in financial time series, Proc. Int. Conf. Systems Theory: Modelling, Analysis and Control, Fes, 2009. Online: in order to propose a model-free setting for delta hedging. It avoids most of the shortcomings encountered with the now classic Black-Scholes-Merton framework. Several convincing computer simulations are presented. Some of them are dealing with abrupt changes, i.e., jumps.
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Soumis le : dimanche 2 mai 2010 - 23:53:48
Dernière modification le : jeudi 11 janvier 2018 - 06:22:13
Document(s) archivé(s) le : jeudi 16 septembre 2010 - 13:14:47


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  • HAL Id : inria-00479824, version 1
  • ARXIV : 1005.0194


Michel Fliess, Cédric Join. Delta Hedging in Financial Engineering: Towards a Model-Free Approach. 18th Mediterranean Conference on Control and Automation, MED'10, Jun 2010, Marrakech, Morocco. IEEE, pp.CDROM, 2010. 〈inria-00479824〉



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