Conservative delta hedging

Citation
Mykland, Per Aslak, Conservative delta hedging, Annals of applied probability , 10(2), 2000, pp. 664-683
ISSN journal
10505164
Volume
10
Issue
2
Year of publication
2000
Pages
664 - 683
Database
ACNP
SICI code
Abstract
It is common to have interval predictions for volatilities and other quantities governing securities prices. The purpose of this paper is to provide an exact method for converting such intervals into arbitrage based prices of financial derivatives or industrial or contractual options.We call this procedure conservative delta hedging. The proposed approach will permit an institution.s management a greater oversight of its exposure to risk.