-- Continuous-time option pricing -- Hedging and more option pricing -- Brownian motion and technical trading -- Theory of markov … -- Theory of risk and utility -- State price and risk-neutral probability -- Single period asset pricing models -- Stochastic …

We propose a flexible framework for hedging a contingent claim by holding static positions in vanilla European calls …, puts, bonds, and forwards. A model-free expression is derived for the optimal static hedging strategy that minimizes the … expected squared hedging error subject to a cost constraint. The optimal hedge involves computing a number of expectations that …