We consider the problem of option hedging in a market with proportional transaction costs. Since super-replication is … very costly in such markets, we replace perfect hedging with an expected loss constraint. Asymptotic analysis for small … transaction costs is used to obtain a tractable model. A general expansion theory is developed using the dynamic programming …

We investigate the pricing of basket credit derivatives and their hedging with single name credit default swaps (CDS … pure jump filtration, we present an extremely efficient approach to pricing and study explicit hedging strategies. …