This paper presents hedging strategies for European and exotic options in a Lévy market. By applying Taylor's theorem, dynamic hedging portfolios are constructed under different market assumptions, such as the existence of power jump assets or moment swaps. In the case of European options or baskets of European options, static hedging is implemented. It is shown that perfect hedging can be achi...

Many industries are exposed to weather risk. Weather derivatives can play a key role in hedging and diversifying such risk because the uncertainty in a company’s profit function can be correlated to weather condition which affects diverse industry sectors differently. Unfortunately the weather derivatives market is a classical example of an incomplete market that is not amenable to standard met...

We present the pricing and hedging method for options with general payoffs in the presence of transaction costs. The convexity of the payoff function gamma of the options is an important issue under transaction costs. When the payoff function is convex, Leland-style pricing and hedging method still works. However, if the payoff function is of general form, additional assumptions on the size of ...

this study examined the effect of explicit instruction of hedging on english forspecific academic purposes (esap) reading comprehension performance ofenglish language learning (ell) university students. a reading comprehensiontest was developed and validated as the pretest and the posttest. the test, includingitems for assessing the comprehension of the students in their area of specialization,...

Estimation of a consistent volatility model of the underlying is crucial for option hedging. The authors illustrate that, compared to the implied/constant volatility method, a local volatility function method can estimate the underlying volatility from option prices more consistently. The result is more accurate hedge parameters and smaller hedging errors. The evidence provided includes an exam...

OF THE DISSERTATION In this thesis, we propose the Markov tree option pricing model and subject it to large-scale empirical tests against market options and equity data to quantify its pricing and hedging performances. We begin by proposing a tree model that explicitly accounts for the dependence observed in the log-returns of underlying asset prices. The dynamics of the Markov tree model is ex...

We consider a general wealth process with a drift coefficient which is a function of the wealth process and the portfolio process with convex constraint. Existence and uniqueness of a minimal solution are established. We convert the problem of hedging American contingent claims into the problem of minimal solution of backward stochastic differential equation, and obtain the upper hedging price ...

This article develops a model for evaluating alternative hedging strategies for financially constrained firms. A key advantage of the model is the ability to capture the intertemporal effects of hedging on the firm’s financial situation. We characterize the optimal hedge. A wide range of alternative hedging strategies can be specified and the model allows us to determine in each case if the hed...

The seller of a contingent claim H can always find a self-financing investment strategy that (super)hedges the claim H. When the seller wants to endow an initial capital x less than the one required to get perfect (super)hedging, the shortfall risk minimisation problem arises in a natural way. The aim is to find the strategy that minimises E{`([H(ST )−V x,φ T ])} (shortfall risk), where V x,φ t...