This paper proposes a Laplace-transform-based approach to price the fixed-strike quantile options as well as to calculate the associated hedging parameters (delta and gamma) under a hyperexponential jump diffusion model, which can be viewed as a generalization of the well-known Black–Scholes model and Kou’s double exponential jump diffusion model. By establishing a relationship between floating...

We apply the concept of cost efficient claims to Lévy market models and find in an application to German stock prizes considerable potential savings the optimal payoffs provide. The magnitude of savings is related to the strength of the market trend. It is shown that the cost-efficient options also exhibit an improved behaviour concerning hedging errors. In the second part we introduce addition...

While the Gaussian copula model is commonly used as a static quotation device for CDO tranches, its use for hedging is questionable. In particular, the spread delta computed from the Gaussian copula model assumes constant base correlations, whereas we show that the correlations are dynamic and correlated to the index spread. It might therefore be expected that a dynamic model of credit risk, wh...

Although model reference adaptive control has been used in numerous applications to achieve system performance without excessive reliance on dynamical system models, the presence of actuator dynamics can seriously limit the stability and the achievable performance of adaptive controllers. In this paper, an linear matrix inequalities-based hedging approach is developed and evaluated for model re...

We propose an approximate static hedging procedure for multivariate derivatives. The hedging portfolio is composed of statically held simple univariate options, optimally weighted minimizing the variance of the difference between the target claim and the approximate replicating portfolio. The method uses simulated paths to estimate the weights of the hedging portfolio and is related to Monte Ca...

We consider hedging of a path-dependent European style option with convex continuous payoff in a discrete time incomplete market, where underlying stock price jumps are distributed over a bounded interval. The incompleteness of the market produces an interval of no-arbitrage option prices for the path-dependent option. Upper and lower bounds for the noarbitrage price interval are developed. Exp...

This article examines how the number of stochastic drivers and their associated volatility structures affect pricing accuracy and hedging performance in the swaption market. In spite of the fact that low dimensional one and two-factor models do not reflect historical correlations that exist among forward rates, we show that they are capable of accurately pricing swaptions as well as higher orde...

Energy companies with commitments to meet customers’ daily electricity demands face the problem of hedging load and price risk. We propose a joint model for load and price dynamics, which is motivated by the goal of facilitating optimal hedging decisions, while also intuitively capturing the key features of the electricity market. Driven by three stochastic factors including the load process, o...

Volatility derivatives are becoming increasingly popular as means for hedging unexpected changes in volatility. Although pricing volatility derivatives demands extreme care in modeling the underlying volatility process, not much attention has been devoted to the complete specification of the autonomous process that volatility follows in continuous time. Despite the fact that jumps are widely co...

the present paper studies hedges in persian academic papers. hedging has an important role in academic discourse; in fact it is a device expressing a writer's degree of certainty or doubt about a proposition. in this study, a collection of 114 academic papers (57 papers in the field of chemistry and 57 papers in the field of persian literature) have been analyzed. the results show that the...