Variance-Optimal Hedging for the Process Based on Non-Extensive Statistical Mechanics and Poisson Jumps |

Pan Zhao
^{a,b,c} and Qingxian Xiao^{ a}^{a}Business School, University of Shanghai for Science and Technology, Shanghai, China
^{b}College of Finance and Mathematics, West Anhui University, Lu'an, Anhui, China
^{c}Financial Risk Intelligent Control and Prevention Institute of West Anhui University, Lu'an, Anhui, China |

Received: December 30, 2015; Revised version: March 28, 2016; In final form: April 4, 2016 |

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In this study, we consider a minimum-variance hedging problem in an incomplete market, in which the risky asset is driven by the process based on non-extensive statistical mechanics and Poisson jumps. Using the stochastic control theory and backward stochastic differential equation method, we obtain a closed-form solution for the minimum-variance hedging policy. |

DOI: 10.12693/APhysPolA.129.1252 PACS numbers: 89.65.Gh |