The minimization of general risk functions is becoming more and more important in portfolio choice theory and optimal hedging. There are two major reasons. Firstly, heavy tails and the lack of symmetry in the returns of many assets provokes that the classical optimization of the standard...

We develop a flexible discrete-time hedging methodology that minimizes the expected value of any desired penalty function of the hedging error within a general regime-switching framework. A numerical algorithm based on backward recursion allows for the sequential construction of an optimal...