MINIMAL VARIANCE HEDGING FOR FRACTIONAL BROWNIAN MOTION

Abstract

We discuss the extension to the multi-dimensional case of the Wick-It integral with respect to fractional Brownian motion, introduced by [6] in the 1-dimensional case. We prove a multidimensional It type isometry for such integrals, which is used in the proof of the multi-dimensional It formula. The results are applied to study the problem of minimal variance hedging in a market driven by fractional Brownian motions.