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...

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Main Authors:	Hirbod Assa, Nikolay Gospodinov
Format:	Article
Language:	English
Published:	MDPI AG 2017-07-01
Series:	Risks
Subjects:	imperfect markets risk measures hedging pricing rule quantile regression
Online Access:	https://www.mdpi.com/2227-9091/5/3/36

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spelling	doaj-de931f4a1ebf480da8fdca8ac4814d012020-11-24T21:18:01ZengMDPI 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
collection	DOAJ
language	English
format	Article
sources	DOAJ
author	Hirbod Assa Nikolay Gospodinov
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
author_facet	Hirbod Assa Nikolay Gospodinov
author_sort	Hirbod Assa
title	A Robust Approach to Hedging and Pricing in Imperfect Markets
title_short	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_sort	robust approach to hedging and pricing in imperfect markets
publisher	MDPI AG
series	Risks
issn	2227-9091
publishDate	2017-07-01
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.
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
_version_	1726010785582284800

A Robust Approach to Hedging and Pricing in Imperfect Markets

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