In this paper we propose a maximum entropy estimator for the asymptotic distribution of the hedging error for options. Perfect replication of financial derivatives is not possible, due to market incompleteness and discrete-time hedging. We derive the asymptotic hedging error for options under a...

This paper examines the current accounts of 16 developed and developing countries over the period 1970 to 2018. We test whether these nations satisfy their intertemporal solvency condition for external imbalances. The solvency condition in the strong form entails: (1) a cointegration, or a long...