A Robust Approach to Hedging and Pricing in Imperfect Markets



Assa, Hirbod and Gospodinov, Nikolay
(2017) A Robust Approach to Hedging and Pricing in Imperfect Markets. RISKS, 5 (3). p. 36.

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Abstract

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.

Item Type: Article
Uncontrolled Keywords: imperfect markets, risk measures, hedging, pricing rule, quantile regression
Depositing User: Symplectic Admin
Date Deposited: 14 Aug 2018 15:01
Last Modified: 19 Jan 2023 01:28
DOI: 10.3390/risks5030036
Open Access URL: http://www.mdpi.com/2227-9091/5/3/36
Related URLs:
URI: https://livrepository.liverpool.ac.uk/id/eprint/3025014