This paper applies to the static hedge of barrier options a technique, mean-square hedging, designed to minimize the size of the hedging error when perfect replication is not possible. It introduces an extension of this technique which preserves the computational efficiency of mean-square...

The art market has seen boom and bust during the last years and, despite the downturn, has received more attention from investors given the low interest environment following the financial crisis. However, participation has been reserved for a few investors and the hedging of exposures remains...

The duality between the robust (or equivalently, model independent) hedging of path dependent European options and a martingale optimal transport problem is proved. The financial market is modeled through a risky asset whose price is only assumed to be a continuous function of time. The hedging...

Duality for robust hedging with proportional transaction costs of path dependent European options is obtained in a discrete time financial market with one risky asset. Investor's portfolio consists of a dynamically traded stock and a static position in vanilla options which can be exercised at...

This paper applies to the static hedge of barrier options a technique, mean-square hedging, designed to minimize the size of the hedging error when perfect replication is not possible. It introduces an extension of this technique which preserves the computational efficiency of mean-square...

In this article we study the price of an American style option based on hedging the underlying assets at discrete time. Like its European style analog, the value of the option is not given in general by an expectation with respect to an equivalent martingale measure. We provide the optimal...

We investigate the effect of including variance derivatives as calibration and hedging instruments for pricing and hedging exotic structures. This is studied empirically using market data for SPX and VIX derivatives applied in a stochastic volatility jump diffusion model

Leland's approach to the hedging of derivatives under proportional transaction costs is based on an approximate replication of the European-type contingent claim VT using the classical Black Scholes formulae with a suitably enlarged volatility. The formal mathematical framework is a scheme of...

In this paper we consider the problem of pricing and hedging European derivatives written on two underlying assets, when individual marginal distributions are known. Our aim is twofold. First, we conduct a parallel analysis between implied volatility and implied correlation for spread options in...