We propose a parsimonious multi-asset Heston model and provide an easy-to-implement calibration algorithm. The model is customized to pricing multi-asset options in markets with liquidly traded single-asset options but no liquidly traded cross-asset options. In this situation, single-asset model...

When managing risk, frequently only imperfect hedging instruments are at hand. We show how to optimally <italic>cross-hedge</italic> risk when the spread between the hedging instrument and the risk is <italic>stationary</italic>. For linear risk positions we derive explicit formulas for the hedge error, and for nonlinear...