Inflexible Multi-Asset Hedging of incomplete market

Trading in real market has lots of risks and limits such as transactions costs, discrete time hedging dates, illiquidity and non-tradable risk factors. These factors make results under the completeness assumption unreliable in most of time. This paper aims to solve hedging problems with three sources of incompleteness: volume risks, discrete tradable dates, and illiquidity constraints. Based on Merton's jump-diffusion model, many studies have been done over the simulation of extreme value movements. In [1],bilateral gamma distribution have excellent degree of fitting the German stock index(DAX).In this paper, a degraded bilateral gamma distribution: variance gamma distribution [2] is taken to simulate the jump size in the classic jump-diffusion model.