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 …

This article presents a quadratic hedging framework for a general class of discrete-time affine multi-factor models and … hedging performance. A semi-explicit hedging formula is derived for our general framework which applies to a myriad of the … modelling features on the hedging effectiveness of S&P 500 options. Overall, we find that fat tails can be credited for half of …

optimal policyholder behaviour. The binomial model results in explicitly formulated perfect hedging strategies funded using … policy holder mortality and death benefits. Pricing, hedging, and the decompositions of the contract are extended to … incorporate mortality risk. We prove limiting results for the hedging strategies and demonstrate mortality risk diversification …

The financial crisis has raised concerns throughout the industry on the possibility that hedging credit valuation … products break down. So, we provide an estimation of the basis risk that arises when hedging credit portfolios with different …

focus on pricing, hedging, and allocation of prices or hedging costs to desks on an individual trade basis. We show how to …

yields and negative volatility risk premia. This study proposes a hedging strategy for volatility as an asset class that …) timely hedging strategy removes the extreme negative tail risk and reduces the negative skewness in exchange for slightly …

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 …