On the martingale representation theorem and approximate hedging a contingent claim in the minimum mean square deviation criterion (reprint)

Abstract

Abstract. In this work we consider the problem of the approximate hedging of a contingent claim in minimum mean square deviation criterion. A theorem on martingale representation in the case of discrete time and an application of obtained result for semi-continous market model are given. Keywords: Hedging, contingent claim, risk neutral martingale measure, martingale representation.