I've heard that Malliavin Calculus can be used to show the explicit form of a delta-neutral hedge (given an SDE driven market model). For example, here is a sketch here on page 21 on how to achieve a $\Delta$-neutral hedge but how would one achieve a $\Delta$-positive hedge.


Fix $T>0$.
My question is how can this proof strategy be used to show the existence of a hedge $H$ which has:

  • positive Delta throughout $[0,T]$
  • H(0)=1
  • $\Delta H(T)\geq \Delta \tilde{H}(T)$ for every hedge $\tilde{H}$ with $\tilde{H}(0)=1$.
  • $\begingroup$ What you are asking is unclear to me: in what respect would that be a $Delta$ hedge if $Delta$ is not zero? $\endgroup$
    – Quantuple
    Oct 5, 2016 at 17:58
  • $\begingroup$ By a hedge I mean an admissible strategy; a progressively measurable map wrt the SDE process $X_t$ modeling the market $\endgroup$
    – ABIM
    Oct 5, 2016 at 21:26


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