Large losses - probability minimizing approach

TL;DR

This paper explores a probability minimizing approach to managing large portfolio losses in both discrete and continuous time models, extending the concept of quantile hedging.

Contribution

It introduces a generalized framework for probability minimizing large losses, broadening the scope of quantile hedging methods.

Findings

Provides a new probabilistic approach to loss management.

Extends quantile hedging to more general loss scenarios.

Applicable to both discrete and continuous time models.

Abstract

The probability minimizing problem of large losses of portfolio in discrete and continuous time models is studied. This gives a generalization of quantile hedging presented in [3].