We derive an expansion for the (expected) difference between the continuously monitored supremum and evenly monitored discrete maximum over a finite time horizon of a jump diffusion process with i.i.d. normal jump sizes. The monitoring error is of the form $a_0/N^{1/2}$ $ a_1/N^{3/2}$ $ \cdots$...

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 so-called leverage hypothesis is that negative shocks to prices/ returns affect volatility more than equal positive shocks. Whether this is attributable to changing financial leverage is still subject to dispute but the terminology is in wide use. There are many tests of the leverage...