Despite the recent market upheavals, the OTC derivatives markets continue to comprise one of the largest components of the financial markets, with an overall outstanding notional of $547 trillion in December 2008, 70% of which are in interest rate derivatives. As of June 2009, this grew to $605...

The replication of any European contingent claim by a static portfolio of calls and puts with strikes forming a continuum, formally proven by Carr and Madan (1998), extends to "standard dispersion" options written on the Euclidean norm of a vector of n asset performances. With the help of...