In both complete and incomplete markets we consider the problem of fulfilling a financial obligation xc as well as possible at time T if the initial capital is not sufficient to hedge xc. This introduces a new risk into the market and our main aim is to minimize this shortfall risk by making use...

A market is described by two correlated asset prices. But only one of them is traded while the contingent claim is a function of both assets. We solve the mean-variance hedging prob- lem completely and prove that the optimal strategy consists of a modified pure hedge expressible in terms of the...

In this paper, we combine modern portfolio theory and option pricing theory so that a trader who takes a position in a European option contract and the underlying assets can construct an optimal portfolio such that at the moment of the contract's maturity the contract is perfectly hedged. We...

We investigate a systemic risk measure known as CoVaR that represents the value-at-risk (VaR) of a financial system conditional on an institution being under distress. For characterizing and estimating CoVaR, we use the copula approach and introduce the normal tempered stable (NTS) copula based...