" to the physical probability measure P, where closeness is measured in terms of relative entropy. In this paper, we … determine the minimal entropy martingale measure in a market where securities are traded with payoffs depending on two types of … these risks are independent under the entropy measure. Moreover, in such a market the entropy measure of the combined …

In this paper we propose a maximum entropy estimator for the asymptotic distribution of the hedging error for options … shortfall of the hedging error. The significance of this approach lies in the fact that the maximum entropy estimator allows us …. Perfect replication of financial derivatives is not possible, due to market incompleteness and discrete-time hedging. We …

, hedging and super-hedging options for a large trader, utility maximization in illiquid markets and price impact models with …

European claim. This allows pricing and hedging under the minimal martingale measure, corresponding to the local risk … pricing and hedging formulae for put and call options are derived in terms of the Black–Scholes formula. Due to market … an approximate hedging formula, which does not require knowledge of these parameters. The hedging strategies are tested …