This article shows how to incorporate cash dividends and credit risk into equity derivatives pricing and risk management. In essence, we show that in an arbitrage-free model the stock price process upon default must have the form S(t) = { F(t) - D(t) } X(t) D(t) ] where X is a local martingale...

This is the revised version of my dissertation. The dissertation covers pricing and hedging of volatiluty derivatives, but also a few other topics. It contains extended material on consistent variance curves, a proof that "smooth" diffusion markets are always complete, comments on pricing in...