Static and Semi-Static Hedging as Contrarian or Conformist Bets
Static and Semi-Static Hedging as Contrarian or Conformist Bets
In this paper, we argue that, once the costs of maintaining the hedging portfolio are properly taken into account, semi-static portfolios should more properly be thought of as separate classes of derivatives, with non-trivial, model-dependent payoff structures. We derive new integral representations for payoffs of exotic European options in terms …