We introduce a new version of Stein’s method that reduces a large class of normal approximation problems to variance bounding exercises, thus making a connection between central limit theorems and concentration of measure. Unlike Skorokhod embeddings, the object whose variance has to be bounded has an explicit formula that makes it possible to carry out the program more easily. As an applicatio...

We provide a new characterization of mean-variance hedging strategies in a general semimartingale market. The key point is the introduction of a new probability measure P ⋆ which turns the dynamic asset allocation problem into a myopic one. The minimal martingale measure relative to P ⋆ coincides with the variance-optimal martin-gale measure relative to the original probability measure P .