We analyze fintechs and their impact on the traditional financial system from a functional perspective. Following the approach suggested by Merton (1995) [A Functional Perspective of Financial Intermediation, Financial Management 24(2), 23–41], we show how the six core functions of financial...

Because of transaction costs and other execution problems, hedging portfolios are readjusted only periodically, usually once a day. The question is whether the hedge ratio should reflect the instantaneous variance, the average variance over the life of the option as in the Black-Scholes model,...