We investigate the pricing of basket credit derivatives and their hedging with single name credit default swaps (CDS … pure jump filtration, we present an extremely efficient approach to pricing and study explicit hedging strategies. …

This paper considers the pricing and hedging of collateralized debt obligations (CDOs). CDOs are complex derivatives on … Schonbucher (2005). Moreover, we derive variance-minimizing hedging strategies for hedgeing single tranches with the full index …. The hedging strategies are given for the general case. We compute them also explicitly for a parsimonious one …

In this note, I study further the approach introduced in for the hedging of derivatives in incomplete markets via local …

-of-sample hedging errors than competing models. This comparison includes versions of Markov Tree and Black-Scholes models in which … indicates that the Markov Tree model's superior hedging performance is due to its robustness with respect to noise in option …

Taking a portfolio perspective on option pricing and hedging, we show that within the standard Black …) hedging the total risk of each option separately, the correct hedge portfolio in discrete time eliminates linear (delta) as … indefinitely. This ties the literature on option pricing and hedging closer together with the APT literature in its focus on …

explaining these phenomena, and in consequence proposes a new approach to pricing and hedging financial derivatives. By adapting …

and foreign interest rates, and a hedging cost for the currency risk to derive a semi-closed-form formula for the CAT bond …