Cutting edge: Minimising risk when hedging crude oil options
Jumps count
The hedging of derivative securities is a central problem in finance and has been studied extensively by both academics and market practitioners. In a complete market, all contingent claims can be perfectly hedged and the main question is how the perfect hedge can be computed. However, in an incomplete market, many derivative securities cannot be perfectly hedged – that is, exactly replicated by self-financing strategies. The hedging problem becomes more challenging. Different hedging approaches
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