Local risk minimization strategies for option pricing

Abstract

[en] The main goal of this work is to introduce the local risk-minimizing strategy that can be applied in incomplete financial markets to hedge options, together with some applications. An option is a financial asset mainly used as an insurance product to protect the investor from the different market risks. The major risk for an option seller is not to be able to cover his future payments obligations with the option price received. This is what option hedging tries to solve, finding the ideal strategy and option price to cover the risk.