Hedging Error Estimate of the American Put Option Problem in Jump-Diffusion Processes

Abstract

We consider discrete time hedging error of the American put option in case of
brusque uctuations in the price of assets. Since continuous time hedging is not
possible in practice so we consider discrete time hedging process. We show that
if the proportions of jump sizes in the asset price are identically distributed independent random variables having nite moments then the value process of the
discrete time hedging uniformly approximates the value process of the corresponding continuous-time hedging in the sense of L1 and L2-norms under the real world probability measure.