Basak, Suleyman; Chabakauri, Georgy - In: Review of Financial Studies 25 (2012) 6, pp. 1845-1896
We provide fully analytical, optimal dynamic hedges in incomplete markets by employing the traditional minimum-variance criterion. Our hedges are in terms of generalized "Greeks" and naturally extend no-arbitrage--based risk management in complete markets to incomplete markets. Whereas the...