Hedging derivative securities and incomplete markets: An ε-arbitrage approach

Operations Research

Volumn 49, Issue 3, 2001, Pages 372-397

  Bertsimas, D ^a   Kogan, L ^a   Lo, A W ^a  

^a MASSACHUSETTS INSTITUTE OF TECHNOLOGY   (United States)

Author keywords

[No Author keywords available]

Indexed keywords

BROWNIAN MOVEMENT; DYNAMIC PROGRAMMING; FINANCE; MARKETING; NUMERICAL ANALYSIS; PARTIAL DIFFERENTIAL EQUATIONS; RECURSIVE FUNCTIONS;

DYNAMIC HEDGING STRATEGY; OPTIMAL REPLICATION PROBLEM; STOCHASTIC DYNAMIC PROGRAMMING;

OPERATIONS RESEARCH;

EID: 0035328579     PISSN: 0030364X     EISSN: None     Source Type: Journal    
DOI: 10.1287/opre.49.3.372.11218     Document Type: Article

References (84)

1. Nonparametric estimation of state-price densities implicit in financial asset prices
2. Uninsured idiosyncratic risk and aggregate saving
3. Asset returns with transactions costs and uninsured individual risk
4. Jump diffusion option valuation in discrete time
5. Option valuation with systematic stochastic volatility
6. Dynamic hedging portfolios for derivative securities in the presence of large transactions costs
7. On jumps in common stock prices and their impact on call option pricing
8. Prices for state-contingent claims: Some estimates and applications
9. Derivative asset pricing with transaction costs
10. When is time continuous?
11. Quadratic-variation-based dynamic strategies
12. Pricing of options and corporate liabilities
13. Discretely adjusted option hedges
14. Option replication in discrete time with transaction costs
15. Multiperiod hedging contingent claims
16. An intertemporal capital pricing model with stochastic investment opportunities
17. State contingent prices implicit in option prices
18. The pricing of contingent claims in discrete-time models
19. The valuation of options for alternative stochastic processes
20. An intertemporal general equilibrium model of asset prices
21. European option pricing with transaction costs
22. Riding on the smile
23. Stochastic equilibria with incomplete financial markets
24. Implementing Arrow-Debreu equilibria by continuous trading few long-lived securities
25. Optimal hedging and equilibrium in a dynamic futures market
26. Mean-variance hedging in continuous time
27. Equilibrium in incomplete markets. I. A basic model of generic existence
28. Equilibrium in incomplete markets. II. Generic existence in stochastic economies
29. Implied volatility functions: Empirical tests
30. Pricing with a smile
31. Nonnegative wealth, absence of arbitrage, and feasible consumption plans
32. Optimal replication of options with transaction costs and trading restrictions
33. Hedging of non-redundant contingent-claims
34. A general theory of asset valuation under diffusion state processes
35. The valuation of compound options
36. Path dependent options: Buy at the low, sell at the high
37. Minimizing transaction costs of option hedging strategies
38. Martingales and arbitrage in multi-period securities markets
39. On the existence of equilibrium in a securities model
40. Market frictions and consumption-based asset pricing
41. The effects of incomplete insurance markets and trading costs in a consumption-based asset pricing model
42. Evaluating the effects of incomplete markets on risk sharing and asset pricing
43. Consumption and portfolio policies with incomplete markets and short-sale constraints
44. Transactions costs and duplication strategies
45. Optimal replication of contingent claims under transaction costs
46. Information structure and equilibrium asset prices
47. Information structures and viable price systems
48. An intertemporal general equilibrium asset pricing model: The case of diffusion information
49. The pricing of options on assets with stochastic volatilities
50. A nonparametric approach to the pricing and hedging of derivative securities via learning networks
51. Approximate option valuation for arbitrary stochastic processes
52. Option pricing when the variance is changing
53. Option pricing and replication with transaction costs
54. An empirical examination of the risk-neutral valuation model
55. Option pricing and the Martingale restriction
56. Asset pricing with undiversifiable income risk and short sales constraints: Deepening the equity premium puzzle
57. Asset prices in an exchange economy
58. Optimum consumption and portfolio rules in a continuous-time model
59. An intertemporal capital asset pricing model
60. Option pricing when underlying stock returns are discontinuous
61. Option replication with transaction costs: An exact solution for the pure jump process
62. State prices implicit in valuation formulae for derivative securities: A Martingale approach
63. The valuation of uncertain income streams and the pricing of options
64. Displaced diffusion option pricing
65. Implied binomial trees
66. On quadratic cost criteria for option hedging
67. Borrowing constraints and aggregate economic activity
68. Mean-variance hedging for general claims
69. Variance-optimal hedging in discrete time
70. Bounds of probability
71. A simple nonparametric approach to derivative security valuation
72. Asset-pricing puzzles and incomplete markets
73. On the mean-variance tradeoff in option replication with transactions costs
74. Equilibrium asset prices with undiversifiable labor income risk
75. Hedge with an edge
76. Option values under stochastic volatility: Theory and empirical estimates