Despite much work on hedging in incomplete markets, the literature still lacks tractable dynamic hedges in plausible environments. In this article, we provide a simple solution to this problem in a general incomplete-market economy in which a hedger, guided by the traditional minimum-variance...

We provide fully analytical, optimal dynamic hedges in incomplete markets by employing the traditional minimum-variance criterion. Our hedges are in terms of generalized "Greeks" and naturally extend no-arbitrage--based risk management in complete markets to incomplete markets. Whereas the...

We study dynamic equilibrium in a Lucas economy with two stocks, two heterogeneous constant relative risk aversion investors, and portfolio constraints. We focus on margin and leverage constraints, which restrict access to credit. We find a positive relationship between the amount of leverage in...

This paper formalizes a novel form of corporate insider trading based on non-insider information. In our model, insiders make trading decisions in anticipation of activist intervention. Because insiders have access to private information about firm fundamentals, they can better separate...