We study financial market incompleteness induced by discontinuities in asset returns. When there are multiple outcomes for a discontinuity, it is shown that this incompleteness cannot be removed by the introduction of extra securities. Claims cannot be hedged and are thereby not uniquely priced...

This article studies the problem of synthetically replicating an American Contingent Claim (ACC) using constrained portfolio policies. In particular, the asset mix of the replicating portfolio strategy must be maintained in a convex constraint set. Using the method of auxiliary markets of...

Some further applications of a General Rate Conservation Law (GRCL) for stationary semimartingales are presented. GRCL is used to characterize the distribution of the reflection of Lévy processes with arbitrary jumps. The stationary distribution of a general jump-diffusion with a reflecting...

We consider a financial market where the asset prices are driven by a multidimensional Brownian motion processs and a multidimensional point process of random jumps admitting stochastic intensity. Using the equivalent martingale measure approach, we construct hedging portfolios for European and...

The inventory equation, Z(t) = X(t) + L(t), where X = X(t):t = 0 is a given netput process and L(t):t = 0 is the corresponding lost potential process, is explored in the general case when X is a negative drift stochastic process that has asymptotically stationary increments. Our results show...