We extend the theory of super-replicating a European option by relaxing its two main assumptions: we take into account the constraints on trading the option and allow it to be traded inter-temporally. The first extension has a dramatic effect on the price of a portfolio hedging the option, while...

Value at Risk (VaR) has emerged in recent years as a standard tool to measure and control the risk of trading portfolios. Yet, existing theoretical analyses of the optimal behavior of a trader subject to VaR limits have produced a negative view of VaR as a risk-control tool. In particular, VaR...