In this study, we investigate the relationship between efficient hedging and fair valuation. We find that efficient hedging does not always lead to fair valuation, and we present a method to measure the difference between the two valuations. This difference can indicate the cost of efficient...

Siegel’s paradox is a fundamental question in international finance about exchange rates for futures contracts and has puzzled many scholars for over forty years. The unorthodox approach presented in this article leads to an arbitrage-free solution which is invariant under currency...

In this paper we will describe a framework that allows us to connect the problem of hedging a portfolio in finance to the existence of Pareto optimal allocations in economics. We will show the solvability of both problems is equivalent to the No Good Deals assumption. We will then analyze the...