This paper proposes a new scheme for the static replication of European options and their portfolios. First, we derive a general approximation formula for efficient static replication as an extension of Carr and Chou (1997, 2002) and Carr and Wu (2002). Second, we present a concrete procedure...

This paper presents an approximate formula for pricing average options when the underlying asset price is driven by time-changed Levy processes. Time-changed Levy processes are attractive to use for a driving factor of underlying prices because the processes provide a flexible framework for...

This paper proposes a simple scheme for static hedging of defaultable contingent claims. It is a kind of generalization of the technique developed by Carr and Chou (1997), Carr and Madan (1998), and Takahashi and Yamazaki (2009a) into unified credit-equity modelings. Our scheme provides a...