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 …

study the question what an investor can do who is unwilling to spend that much, and who is ready to use a hedging strategy … which succeeds with high probability. -- Hedging ; superhedging ; Neyman Pearson lemma ; stochastic volatility ; value at …

An investor faced with a contingent claim may eliminate risk by (super-)hedging in a financial market. As this is often …-)hedge, depending on the accepted level of shortfall risk. -- risk management ; stochastic volatility ; shortfall risk ; Hedging …

typically uses the so-called delta-hedging strategy. This strategy stems from the Black-Merton-Scholes model where it perfectly … in practice the delta-hedging strategy is widely used and its potential shortcoming in models with jumps is disregarded … a complete model with jumps where the delta-hedging strategy is well-defined for regular payoff functions and is …

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 …

We reveal pitfalls in the hedging of insurance contracts with a minimum return guarantee on the underlying investment …, e.g.\ an external mutual fund. We analyze basis risk entailed by hedging the guarantee with a dynamic portfolio of proxy … risk. We demonstrate that both risks may be surprisingly high and show how the design of the contract and the hedging …

rated countries. We analyze hedging strategies for bond portfolios with futures on German and Italian government bonds … before and during the sovereign debt crisis and evaluate their out-of-sample hedging effectiveness. Before the crisis, German … futures were efficient instruments for hedging government bond portfolios, but during the crisis, a composite hedge combining …