Static hedge portfolios for barrier options are extremely sensitive with respect to changes of the volatility surface. In this paper we develop a semi-infinite programming formulation of the static super-replication problem in stochastic volatility models which allows to robustify the hedge...

We consider the hedging of derivative securities when the price movement of the underlying asset can exhibit random jumps. Under a one factor Markovian setting, we derive a spanning relation between a long term option and a continuum of short term options. We then apply this spanning relation to...

We consider the hedging of options when the price of the underlying asset is always exposed to the possibility of jumps of random size. Working in a single factor Markovian setting, we derive a new spanning relation between a given option and a continuum of shorter-term options written on the...

We develop a generic method for constructing a weak static minimum variance hedge for a wide range of derivatives that may involve optimal exercise features or contingent cash flow streams to provide a hedge along a sequence of future hedging dates. The optimal hedge is constructed using a...

We conduct an empirical evaluation of a static super-replicating hedge of barrier options. The hedge is robust to uncertainty about the future skew. Using almost seven years of current data on the DAX, we evaluate the performance of the hedge and compare it with those of both a dynamic and a...

Imposing a symmetry condition on returns, Carr and Lee (Math Financ 19(4):523–560, <CitationRef CitationID="CR10">2009</CitationRef>) show that (double) barrier derivatives can be replicated by a portfolio of European options and can thus be priced using fast Fourier techniques (FFT). We show that prices of barrier derivatives in...</citationref>

This paper studies the hedging performance of static replication approach proposed by Derman, Ergener, and Kani (DEK, 1995) for continuous barrier options under the constant elasticity of variance (CEV) model of Cox (1975) and Cox and Ross (1976), and then focuses on how to improve the DEK...

Guaranteed lifetime withdrawal benefits (GLWB) embedded in variable annuities have become an increasingly popular type of life annuity designed to cover systematic mortality risk while providing protection to policyholders from downside investment risk. This paper provides an extensive study of...