What is it about?
Suppose you have approximation to American option value function. then using our device to pass to convex envelope you will construct the approximation to optimal hedging portfolio.
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Why is it important?
Construction of hedging portfolio for American option usually requires the solution of the parabolic variational inequality, while our approach needs only approximation to the value function of American option.
Perspectives
For American options written on several assets the same device will result in practical construction of nearly optimal hedging portfolio
Professor Malkhaz Shashiashvili
Ivane Javakhishvili Tbilisi State University
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This page is a summary of: DISCRETE TIME HEDGING OF THE AMERICAN OPTION, Mathematical Finance, September 2010, Wiley,
DOI: 10.1111/j.1467-9965.2010.00415.x.
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