Two topics in mathematical finance: mandate models and mean-variance hedging LSE Research Online Home home About
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mathematical finance: mandate models and mean-variance hedging Sun, R. (2026). Two topics in mathematical finance:
mandate models and mean-variance hedging [PhD thesis]. London School of Economics and Political Science.
https://doi.org/10.21953/researchonline.lse.ac.uk.00140476 Copy Share Abstract This thesis explores two distinct
research directions in mathematical finance. The first part is motivated by the inelastic market hypothesis, which
suggests that the aggregate equity market displays only small price elasticity. In the interpretation of Gabaix and
Koijen (2023), this phenomenon arises because institutional investors operate under investment mandates, meaning
explicit allocation rules that prescribe how capital must be distributed across assets. In this part, we develop a
rigorous framework of a mandate model for a representative agent and provide precise conditions under which the stock
capitalisation dynamics are well defined. We also study how mandates amplify or attenuate the response of stock
capitalisation to changes in bond capitalisation. We furthermore formulate conditions under which different funds, each
one equipped with their own mandate, can be aggregated to a representative fund. The second part studies the
mean-variance hedging problem originally considered by Duffie and Richardson (1991), where a stock position is
dynamically hedged by trading futures contracts. In their model, the stochastic logarithms of the price processes are
continuous processes with independent increments. We extend this setting to a semi-martingale framework with independent
increments, allowing for jump components. Optimal strategies are obtained using results from the general quadratic
hedging literature, in particular the framework of Černý and Kallsen (2007). Item Type Thesis (PhD) Copyright holders
© 2026 Yueying Sun Departments LSE > Academic Departments > Mathematics DOI
10.21953/researchonline.lse.ac.uk.00140476 Supervisor Ruf, Johannes, Veraart, Luitgard Date Deposited 6 August 2026 URI
https://researchonline.lse.ac.uk/id/eprint/140476 Explore Further Sun, Yueying QA MathematicsHG Finance Close
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