Abstract.
Föllmer and Sondermann (1986) proved the existence of a unique admissible risk-minimizing hedging strategy for any square-integrable contingent claim H in the martingale case. We extend this approach to the situation where the hedger's liabilities are described by a general payment process A and consider some examples related to insurance. These include a general unit-linked life insurance contract driven by a Markov jump process and a claim process from non-life insurance where the claim size distribution is affected by a traded price index.
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Manuscript received: November 1998; final version received: October 2000
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Møller, T. Risk-minimizing hedging strategies for insurance payment processes. Finance Stochast 5, 419–446 (2001). https://doi.org/10.1007/s007800100041
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DOI: https://doi.org/10.1007/s007800100041