This paper deals with the superhedging of derivatives on incomplete markets, i.e. with portfolio strategies which generate payoffs at least as high as that of a given contingent claim. The simplest solution to this problem is in many cases a static superhedge, i.e. a buy-and-hold strategy...

This paper provides a theoretical and numerical analysis of robust hedging strategies in diffusion?type models including stochastic volatility models. A robust hedging strategy avoids any losses as long as the realised volatility stays within a given interval. We focus on the effects of...

When options are traded, one can use their prices and price changes to draw inference about the set of risk factors and their risk premia. We analyze tests for the existence and the sign of the market prices of jump risk that are based on option hedging errors. We derive a closed-form solution...

Variance contracts permit the trading of ’variance risk’, i.e. the risk that the realizedvariance of stock returns changes randomly over time. We discuss why investorsmight want to trade this type of risk, and why they might prefer a variance contractto standard calls and puts for this...

This paper deals with the superhedging of derivatives on incomplete markets, i.e.with portfolio strategies which generate payoffs at least as high as that of a givencontingent claim. The simplest solution to this problem is in many cases a staticsuperhedge, i.e. a buy-and-hold strategy...

The vast majority of approaches to risk management, hedging, or portfolio planningassume that some model is given. However, under model risk, the true data gener-ating process is not known. The focus of this paper is on problems related to thehedging of derivative contracts. We explain the main...

Convex duality for two two different super-replication problems in a continuous time financial market with proportional transaction cost is proved. In this market, static hedging in a finite number of options, in addition to usual dynamic hedging with the underlying stock, are allowed. The first...

The duality between the robust (or equivalently, model independent) hedging of path dependent European options and a martingale optimal transport problem is proved. The financial market is modeled through a risky asset whose price is only assumed to be a continuous function of time. The hedging...

Duality for robust hedging with proportional transaction costs of path dependent European options is obtained in a discrete time financial market with one risky asset. Investor's portfolio consists of a dynamically traded stock and a static position in vanilla options which can be exercised at...

This paper examines whether and how the popularity of portfolio insurance strategies can be justified theoretically. The analysis employs three different return generating processes with and without stochastic volatility and jumps. We find that an investor with constant relative risk aversion...