robust optimal control problem under model uncertainty leads to (i) risk-neutral pricing for the traded risky assets, and (ii …) adjusting the drift of the nontraded risk drivers in a conservative direction. The direction depends on the agent's long or …

This paper is the first to study the hedging of price risk with uncertain payment dates, a frequent problem in practice …. It derives a variance-minimizing hedging strategy for two settings, the first employing linear contracts with different … advantages with increasing hedge horizons and strongly dependent time and price risk, while linear instruments can suffice for …

We investigate the effect of including variance derivatives as calibration and hedging instruments for pricing and … hedging exotic structures. This is studied empirically using market data for SPX and VIX derivatives applied in a stochastic …

We derive risk-neutral option price formulas for plain-vanilla temperature futures derivatives on the basis of several … spatial temperature risk simultaneously …

The two main issues for managing wrong way risk (WWR) for the credit valuation adjustment (CVA, i.e. WW-CVA) are … calibration and hedging. Hence we start from a novel model-free worst-case approach based on static hedging of counterparty …

European claim. This allows pricing and hedging under the minimal martingale measure, corresponding to the local risk …This paper examines a simple basis risk model based on correlated geometric Brownian motions. We apply quadratic … criteria to minimize basis risk and hedge in an optimal manner. Initially, we derive the Föllmer–Schweizer decomposition for a …

In this article we derive risk-neutral option price formulas for both plain-vanilla and exotic electricity futures … anticipating conditional expectations. As a by-product we derive related risk and information premia. Finally, we investigate …