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arXiv · 2308.01121

An optimal transport approach for the multiple quantile hedging problem

Cyril Bénézet·Jean-François Chassagneux·Mohan Yang
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Abstract

We consider the multiple quantile hedging problem, which is a class of partial hedging problems containing as special examples the quantile hedging problem (F{\"o}llmer \& Leukert 1999) and the PnL matching problem (introduced in Bouchard \& Vu 2012). In complete non-linear markets, we show that the problem can be reformulated as a kind of Monge optimal transport problem. Using this observation, we introduce a Kantorovitch version of the problem and prove that the value of both problems coincide. In the linear case, we thus obtain that the multiple quantile hedging problem can be seen as a semi-discrete optimal transport problem, for which we further introduce the dual problem. We then prove that there is no duality gap, allowing us to design a numerical method based on SGA algorithms to compute the multiple quantile hedging price.

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Cyril Bénézet, Jean-François Chassagneux, Mohan Yang. 2023-08-02. An optimal transport approach for the multiple quantile hedging problem. https://arxiv.org/abs/2308.01121

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