In this paper we propose a maximum entropy estimator for the asymptotic distribution of the hedging error for options. Perfect replication of financial derivatives is not possible, due to market incompleteness and discrete-time hedging. We derive the asymptotic hedging error for options under a...

The parametric estimation of stochastic differential equations (SDEs) has been the subject of intense studies already for several decades. The Heston model, for instance, is based on two coupled SDEs and is often used in financial mathematics for the dynamics of asset prices and their...