Static Hedging of Barrier Options under General Asset Dynamics: Unification and Application

A new method for static hedging of barrier options under general asset dynamics is introduced. The method unifies previous approaches and nests their extensions. Using a finite set of hedge instruments the method is directly implementable and it is shown how to operationalize the hedge in a jump-diffusion model with correlated stochastic volatility. The performance of the hedge is thoroughly studied and generic sources of hedge errors are addressed.

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Year of publication:	2005-11
Authors:	Nalholm, Morten
Institutions:	Økonomisk Institut, Københavns Universitet

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Extent:	application/pdf
Series:	FRU Working Papers.
Type of publication:	Book / Working Paper
Notes:	Number 2005/08 30 pages
Source:	RePEc - Research Papers in Economics

Persistent link: https://www.econbiz.de/10005750007