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...

We consider a diffusion model of small variable type with positive drift density varying in a nonparametric set. We investigate Gaussian and Poisson approximations to this model. In the sense of asymptotic equivalence of experiments, it is shown that observation of the diffusion process until...