TITLE:
VaR-Optimal Risk Management in Regime-Switching Jump-Diffusion Models
AUTHORS:
Alessandro Ramponi
KEYWORDS:
Regime Switching Jump-Diffusion Models; Value at Risk; Risk Management; Fourier Transform Methods
JOURNAL NAME:
Journal of Mathematical Finance,
Vol.3 No.1,
February
28,
2013
ABSTRACT: In this paper we study a classical option-based portfolio strategy which minimizes the Value-at-Risk of the hedged position in a continuous time, regime-switching jump-diffusion market, by using Fourier Transform methods. However, the analysis of this hedging strategy, as well as the computational technique for its implementation, is fairly general, i.e. it can be applied to any dynamical model for which Fourier transform methods are viable.