The combination of stochastic derivative pricing models and downside risk measures often leads to the paradox (risk … expected returns and very negative downside risk (henceforth "golden strategy") has only been studied if all the involved … multi-asset golden strategies for both the expected shortfall and the expectile risk measure, and shows that the use of …

' prices, expected returns, risk exposure, and optimal exercise policies respond to variations in the risk exposure of the … underlying asset. The model allows one to separate the effects from changes in idiosyncratic versus systematic risk. Among the … new insights we establish are that i) call prices typically respond negatively to increases in systematic risk, ii) the …

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 …

-hedger. Tail-risk measures are shown to diminish by conditioning the hedging strategy and valuation on realized volatility. The … ratios, irreducible hedging errors, and option-trading risk premiums are delineated …) method. Detailed here are (1) the option hedging strategy and its costs; (2) irreducible hedging errors associated with …

In this paper, we derive optimal hedging strategies for options in electricity futures markets. Optimality is measured … in terms of minimal variance and the associated minimal variance hedging portfolios are obtained by a stochastic maximum …

that an understanding of the dynamics used in model for CDO is required to bring it to par with derivative models used for … other asset classes, such as the risk neutral diffusion models used for equity, currency and commodity options derived from …” used for pricing and hedging would have when seen as a static model. We focus on credit models where large homogeneous pool …

The severity and occurrence of rare events in financial markets has had a fundamental impact on the pricing and risk …

them to obtain an improved fit on index returns. It also proves to be an effective risk management tool, producing reliable … Value-at-Risk estimates for straddle and strangle positions, and accurate forecasts of the VIX distribution …

The price of a European option can be computed as the expected value of the payoff function under the risk … derive a model-free analytical formula for the implied risk-neutral density based on the implied moments of the implicit … condition. The risk-neutral density is semi-parametric as it is the result of applying the multivariate generalised Edgeworth …