A Robust Approach to Hedging and Pricing in Imperfect Markets
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 p...
| Main Authors: | , |
|---|---|
| Format: | Article |
| Language: | English |
| Published: |
MDPI AG
2017-07-01
|
| Series: | Risks |
| Subjects: | |
| Online Access: | https://www.mdpi.com/2227-9091/5/3/36 |
| _version_ | 1828269761129086976 |
|---|---|
| author | Hirbod Assa Nikolay Gospodinov |
| author_facet | Hirbod Assa Nikolay Gospodinov |
| author_sort | Hirbod Assa |
| collection | DOAJ |
| description | 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 a solution and pricing is possible. The practical implications of our proposed theoretical approach are illustrated with an application on hedging economic risk. |
| first_indexed | 2024-04-13T05:34:24Z |
| format | Article |
| id | doaj.art-de931f4a1ebf480da8fdca8ac4814d01 |
| institution | Directory Open Access Journal |
| issn | 2227-9091 |
| language | English |
| last_indexed | 2024-04-13T05:34:24Z |
| publishDate | 2017-07-01 |
| publisher | MDPI AG |
| record_format | Article |
| series | Risks |
| spelling | doaj.art-de931f4a1ebf480da8fdca8ac4814d012022-12-22T03:00:20ZengMDPI AGRisks2227-90912017-07-01533610.3390/risks5030036risks5030036A Robust Approach to Hedging and Pricing in Imperfect MarketsHirbod Assa0Nikolay Gospodinov1Institute for Financial and Actuarial Mathematics, University of Liverpool, Mathematical Sciences Building, Peach Street, Liverpool L69 7ZL, UKResearch Department, Federal Reserve Bank of Atlanta, 1000 Peachtree Street N.E., Atlanta, GA 30309-4470, USAThis 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 a solution and pricing is possible. The practical implications of our proposed theoretical approach are illustrated with an application on hedging economic risk.https://www.mdpi.com/2227-9091/5/3/36imperfect marketsrisk measureshedgingpricing rulequantile regression |
| spellingShingle | Hirbod Assa Nikolay Gospodinov A Robust Approach to Hedging and Pricing in Imperfect Markets Risks imperfect markets risk measures hedging pricing rule quantile regression |
| title | A Robust Approach to Hedging and Pricing in Imperfect Markets |
| title_full | A Robust Approach to Hedging and Pricing in Imperfect Markets |
| title_fullStr | A Robust Approach to Hedging and Pricing in Imperfect Markets |
| title_full_unstemmed | A Robust Approach to Hedging and Pricing in Imperfect Markets |
| title_short | A Robust Approach to Hedging and Pricing in Imperfect Markets |
| title_sort | robust approach to hedging and pricing in imperfect markets |
| topic | imperfect markets risk measures hedging pricing rule quantile regression |
| url | https://www.mdpi.com/2227-9091/5/3/36 |
| work_keys_str_mv | AT hirbodassa arobustapproachtohedgingandpricinginimperfectmarkets AT nikolaygospodinov arobustapproachtohedgingandpricinginimperfectmarkets AT hirbodassa robustapproachtohedgingandpricinginimperfectmarkets AT nikolaygospodinov robustapproachtohedgingandpricinginimperfectmarkets |