Baule, Rainer; Rosenthal, Philip - In: Journal of risk and financial management : JRFM 15 (2022) 1, pp. 1-20
Hedging down-and-out puts (and up-and-out calls), where the maximum payoff is reached just before a barrier is hit that … would render the claim worthless afterwards, is challenging. All hedging methods potentially lead to large errors when the …, we analyze this hedging situation, especially the case of overnight trading gaps. We show how a position in a short …
