Lecture Computational Finance / Numerical Methods 19: Hedging in Discrete Time
Channel: finmath
Date: 06/07/2020

Lecture on Computational Finance / Numerical Methods for Mathematical Finance. Session 19: Hedging in Discrete Time

A session on hedging in discrete time, with the time-discrete delta hedge and the time-discrete delta-gamma hedge. Includes some nice numerical experiments using Monte-Carlo simulation and a hedge simulator.

- Hedging in discrete time
- Self-financing condition in discrete time
- Error propagation
- Delta hedge
- Numerical experiment: Delta hedge of a European option under the Black-Scholes model
- Delta-gamma hedge
- Numerical experiment: Delta-gamma hedge of a European option under the Black-Scholes model

Resources:
- Hedge Simulator:
  http://www.finmath.net/finmath-experiments/black-scholes-hedge-simulator/

- Source Code:
  https://github.com/finmath/finmath-lib/blob/finmath-lib-5.0.3/src/main/java/net/finmath/montecarlo/assetderivativevaluation/products/BlackScholesDeltaHedgedPortfolio.java