net.finmath.montecarlo.assetderivativevaluation.products

Class LocalRiskMinimizingHedgePortfolio

java.lang.Object

net.finmath.montecarlo.AbstractMonteCarloProduct

net.finmath.montecarlo.assetderivativevaluation.products.AbstractAssetMonteCarloProduct

net.finmath.montecarlo.assetderivativevaluation.products.LocalRiskMinimizingHedgePortfolio

All Implemented Interfaces:

Product, AssetMonteCarloProduct, MonteCarloProduct

public class LocalRiskMinimizingHedgePortfolio
extends AbstractAssetMonteCarloProduct

This class implements a mean variance hedged portfolio of a given product (a hedge simulator). The hedge is done using a given model, that is, the model generating the states and the model used to calculate the hedge portfolio may be different!
WARNING: If the model used for calculating the delta is "slow" (e.g., a Monte-Carlo simulation) then the calculation might take very long.

Version:

1.0

Author:

Christian Fries

Constructor Summary

Constructors

Constructor and Description
LocalRiskMinimizingHedgePortfolio(AbstractAssetMonteCarloProduct productToHedge, AssetModelMonteCarloSimulationModel modelUsedForHedging, TimeDiscretization timeDiscretizationForRebalancing, int numberOfBins) Construction of a variance minimizing hedge portfolio.

Method Summary

Modifier and Type	Method and Description
RandomVariable	getValue(double evaluationTime, AssetModelMonteCarloSimulationModel model)

Methods inherited from class net.finmath.montecarlo.assetderivativevaluation.products.AbstractAssetMonteCarloProduct

getValue

Methods inherited from class net.finmath.montecarlo.AbstractMonteCarloProduct

getCurrency, getValue, getValue, getValues, getValues, getValues, getValuesForModifiedData, getValuesForModifiedData, getValuesForModifiedData, getValuesForModifiedData, toString

Methods inherited from class java.lang.Object

clone, equals, finalize, getClass, hashCode, notify, notifyAll, wait, wait, wait

Constructor Detail

LocalRiskMinimizingHedgePortfolio

public LocalRiskMinimizingHedgePortfolio(AbstractAssetMonteCarloProduct productToHedge,
                                         AssetModelMonteCarloSimulationModel modelUsedForHedging,
                                         TimeDiscretization timeDiscretizationForRebalancing,
                                         int numberOfBins)

Construction of a variance minimizing hedge portfolio.

Parameters:

productToHedge - The financial product for which the hedge portfolio should be constructed.

modelUsedForHedging - The model used for calculating the hedge rations (deltas). This may differ from the model passed to getValue.

timeDiscretizationForRebalancing - The times at which the portfolio is re-structured.

numberOfBins - The number of bins to use in the estimation of the conditional expectation.

Method Detail

getValue

public RandomVariable getValue(double evaluationTime,
                               AssetModelMonteCarloSimulationModel model)
                        throws CalculationException

Specified by:

getValue in interface AssetMonteCarloProduct

Specified by:

getValue in class AbstractAssetMonteCarloProduct

Throws:

CalculationException