investors and the hedging of exposures remains dificult. This paper proposes to overcome these problems by introducing a call … hedging risk. Even if this is not entirely possible, the replication approach serves as pricing benchmark for investors who …

The duality between the robust (or equivalently, model independent) hedging of path dependent European options and a … to be a continuous function of time. The hedging problem is to construct a minimal super-hedging portfolio that consists …

In this article we study the price of an American style option based on hedging the underlying assets at discrete time … equivalent martingale measure. We provide the optimal solution that minimizes the hedging error variance. When the assets … proposed for pricing American options. We proceed to a Monte Carlo experiment in which the hedging performance of the solution …

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 …

In this paper we consider the problem of pricing and hedging European derivatives written on two underlying assets … Power Frank (PF) and Power Student t (PST) copulas. Second, we address the problem of hedging portfolios made of two … trades. The proposed hedging methods for dependence risk are compared to alternatives in a numerical analysis in which we …

generalized static replication approach for hedging the in-arrears clean index principal swaps and annuity options …

We examine optimal quadratic hedging of barrier options in a discretely sampled exponential Lévy model that has been … realistically calibrated to reflect the leptokurtic nature of equity returns. Our main finding is that the impact of hedging errors …

In this paper we consider the problem of hedging an arithmetic Asian option with discrete monitoring in an exponential … to the hedging error and the impact of model error on the quality of the chosen hedging strategy. The numerical analysis … shows the impact of jump risk on the hedging error of the option position, and the importance of including traded options in …

) method. Detailed here are (1) the option hedging strategy and its costs; (2) irreducible hedging errors associated with … realistically fat-tailed & asymmetric return distributions; (3) impact of transaction costs on hedging costs and hedge …-performance; (4) impact of conditioning hedging strategy on realized volatility. The asset returns are addressed by the General Auto …