MINIMAL VARIANCE HEDGING FOR FRACTIONAL BROWNIAN MOTION

We discuss the extension to the multi-dimensional case of the Wick-Itô integral with respect to fractional Brownian motion, introduced by [6] in the 1-dimensional case. We prove a multidimensional Itô type isometry for such integrals, which is used in the proof of the multi-dimensional Itô formula. The results are applied to study the problem of minimal variance hedging in a market driven by fractional Brownian motions.

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Published 1 January 2003