This paper proposes a model-free approach to hedging and pricing in the presence of market imperfections such as market … incompleteness and frictions. The generality of this framework allows us to conduct an in-depth theoretical analysis of hedging … strategies with a wide family of risk measures and pricing rules, and study the conditions under which the hedging problem admits …

The paper discusses the problem of hedging not perfectly replicable contingent claims by using a benchmark, the … pricing and hedging for an increasing number of not fully replicable benchmarked contingent claims …

The paper discusses the problem of hedging not perfectly replicable contingent claims by using a benchmark, the … pricing and hedging for an increasing number of not fully replicable benchmarked contingent claims …

We develop a robust optimal dynamic hedging strategy that takes both downside risks and market incompleteness into … hedging can be decreased by following the robust strategy …

explicit optimal portfolios or hedging strategies under realistic assumptions …

literature suggests that even in the absence of any ability to predict returns, holding options positions on the benchmark assets …. The enhancement from holding options can be substantial if the implied volatilities of the options are higher than the …

sensitivities to chosen risk factors. I test these portfolios empirically and find that options signifi cantly improve the risk …

Taking a portfolio perspective on option pricing and hedging, we show that within the standard Black …-Scholes-Merton framework large portfolios of options can be hedged without risk in discrete time. The nature of the hedge portfolio in the … values of the options in our framework are driven by systematic and idiosyncratic risk factors. Instead of linearly (delta …

, is the risk management of the embedded options by a tractable and realistic hedging strategy. The long maturity of life …