Deep partial hedging

Hou, Songyan; Krabichler, Thomas; Wunsch, Marcus

doi:10.3390/jrfm15050223

Please use this identifier to cite or link to this item: https://doi.org/10.21256/zhaw-25472

Publication type:	Article in scientific journal
Type of review:	Peer review (publication)
Title:	Deep partial hedging
Authors:	Hou, Songyan Krabichler, Thomas Wunsch, Marcus
et. al:	No
DOI:	10.3390/jrfm15050223 10.21256/zhaw-25472
Published in:	Journal of Risk and Financial Management
Volume(Issue):	15
Issue:	5
Pages to:	223
Issue Date:	2022
Publisher / Ed. Institution:	MDPI
ISSN:	1911-8066 1911-8074
Language:	English
Subjects:	Machine learning; Risk management; Transaction cost; Market friction; Partial hedging
Subject (DDC):	006: Special computer methods 332.6: Investment
Abstract:	Using techniques from deep learning, we show that neural networks can be trained successfully to replicate the modified payoff functions that were first derived in the context of partial hedging by Föllmer and Leukert. Not only does this approach better accommodate the realistic setting of hedging in discrete time, it also allows for the inclusion of transaction costs as well as general market dynamics. It needs to be noted that, without further modifications, the approach works only if the risk aversion is beyond a certain level.
URI:	https://digitalcollection.zhaw.ch/handle/11475/25472
Fulltext version:	Published version
License (according to publishing contract):	CC BY 4.0: Attribution 4.0 International
Departement:	School of Management and Law
Organisational Unit:	Institute of Wealth & Asset Management (IWA)
Appears in collections:	Publikationen School of Management and Law

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Hou, S., Krabichler, T., & Wunsch, M. (2022). Deep partial hedging. Journal of Risk and Financial Management, 15(5), 223. https://doi.org/10.3390/jrfm15050223

Hou, S., Krabichler, T. and Wunsch, M. (2022) ‘Deep partial hedging’, Journal of Risk and Financial Management, 15(5), p. 223. Available at: https://doi.org/10.3390/jrfm15050223.

S. Hou, T. Krabichler, and M. Wunsch, “Deep partial hedging,” Journal of Risk and Financial Management, vol. 15, no. 5, p. 223, 2022, doi: 10.3390/jrfm15050223.

HOU, Songyan, Thomas KRABICHLER und Marcus WUNSCH, 2022. Deep partial hedging. Journal of Risk and Financial Management. 2022. Bd. 15, Nr. 5, S. 223. DOI 10.3390/jrfm15050223

Hou, Songyan, Thomas Krabichler, and Marcus Wunsch. 2022. “Deep Partial Hedging.” Journal of Risk and Financial Management 15 (5): 223. https://doi.org/10.3390/jrfm15050223.

Hou, Songyan, et al. “Deep Partial Hedging.” Journal of Risk and Financial Management, vol. 15, no. 5, 2022, p. 223, https://doi.org/10.3390/jrfm15050223.