In this paper we propose a maximum entropy estimator for the asymptotic distribution of the hedging error for options. Perfect replication of financial derivatives is not possible, due to market incompleteness and discrete-time hedging. We derive the asymptotic hedging error for options under a...

In this paper, we deal with the pricing of European options in an incomplete market. We use the common risk measures Value-at-Risk and Expected Shortfall to define good-deals on a financial market with log-normally distributed rate of returns. We show that the pricing bounds obtained from the...