This paper is the first to study the hedging of price risk with uncertain payment dates, a frequent problem in practice … advantages with increasing hedge horizons and strongly dependent time and price risk, while linear instruments can suffice for …

, - statistical arbitrage models, - arbitrage-free pricing, risk-neutral implied densities, - equilibrium pricing approaches … intense techniques for pricing, estimation and backtesting, - complex derivative products, - credit and counterparty risk …

This paper examines a simple basis risk model based on correlated geometric Brownian motions. We apply quadratic … criteria to minimize basis risk and hedge in an optimal manner. Initially, we derive the Föllmer–Schweizer decomposition for a … European claim. This allows pricing and hedging under the minimal martingale measure, corresponding to the local risk …