Trade and commerce in financial instruments such as stocks, bonds and contingent claims with the goal of exchanging future cash flows is as old as commerce itself. Commerce would be empty and meaningless without a clear perception of risk, thus the principal questions pertaining to commerce are:...

We review the nature of some well-known phenomena such as volatility smiles, convexity adjustments and parallel derivative markets. We propose that the market is incomplete and postulate the existence of intrinsic risks in every contingent claim as a basis for understanding these phenomena. In a...