This paper provides a theoretical and numerical analysis of robust hedging strategies in diffusion?type models … including stochastic volatility models. A robust hedging strategy avoids any losses as long as the realised volatility stays …

When options are traded, one can use their prices and price changes to draw inference about the set of risk factors and … option hedging errors. We derive a closed-form solution for the option hedging error and its expecta- tion in a stochastic …, the expected hedging error cannot identify the exact structure of the compensation for jump risk. Furthermore, we derive …

additionalstandard options. …

The vast majority of approaches to risk management, hedging, or portfolio planningassume that some model is given … much too complicated to solve in realisticmodel setups, we furthermore discuss robust hedging strategies determined …

study the question what an investor can do who is unwilling to spend that much, and who is ready to use a hedging strategy … which succeeds with high probability. -- Hedging ; superhedging ; Neyman Pearson lemma ; stochastic volatility ; value at …

An investor faced with a contingent claim may eliminate risk by (super-)hedging in a financial market. As this is often …-)hedge, depending on the accepted level of shortfall risk. -- risk management ; stochastic volatility ; shortfall risk ; Hedging …

Taking a portfolio perspective on option pricing and hedging, we show that within the standard Black …-Scholes-Merton framework large portfolios of options can be hedged without risk in discrete time. The nature of the hedge portfolio in the … values of the options in our framework are driven by systematic and idiosyncratic risk factors. Instead of linearly (delta …

This paper applies to the static hedge of barrier options a technique, mean-square hedging, designed to minimize the … the distribution of the underlying asset. -- barrier options ; static hedging ; mean-square hedging … size of the hedging error when perfect replication is not possible. It introduces an extension of this technique which …