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 …

log-returns and their volatility with the aim of analysing which risk factors and which distribution features provide a … robust calibration, repricing and hedging performance. The novelty of the approach stems from the generality of the jump …) calibration, (2) out-of-sample pricing and (3) hedging residual risk. Results show that joint pure jump dynamics for log …