-
Discrete-time hedging, basis risk, and covariance-dependent pricing kernels
Discrete-time hedging, basis risk, and covariance-dependent pricing kernels
Speaker: Prof. Maciej Augustyniak, Dept. of Mathematics & Statistics, University of Montreal Abstract: Basis risk arises when hedging a financial derivative with an instrument different from its underlying asset. This risk can significantly impair hedging effectiveness and must therefore be properly managed. This article develops a discrete-time hedging framework for European-style derivatives that explicitly accounts […]