In a complete market with a constant interest rate and a risky asset, which is a linear diffusion process, we are interested in the discrete time hedging of a European vanilla option with payoff function f. As regards the perfect continuous hedging, this discrete time strategy induces, for the...

This short note corrects an error (a factor is missing) in two formulas related to L <Superscript>2</Superscript>-limits, established in “Discrete time hedging errors for options with irregular payoffs” by E. Gobet and E. Temam, Finance and Stochastics, 5, 357–367 (<CitationRef CitationID="CR6">2001</CitationRef>). Copyright Springer-Verlag Berlin Heidelberg...</citationref></superscript>

This overview article concerns the notion of fractional smoothness of random variables of the form $g(X_T)$, where $X=(X_t)_{t\in [0,T]}$ is a certain diffusion process. We review the connection to the real interpolation theory, give examples and applications of this concept. The applications in...