IDEAS home Printed from
   My bibliography  Save this paper

Static Hedging of Barrier Options under General Asset Dynamics: Unification and Application


  • Morten Nalholm

    (Department of Applied Mathematics and Statistics, Institute for Mathematical Sciences, University of Copenhagen)


A new method for static hedging of barrier options under general asset dynamics is introduced. The method unifies previous approaches and nests their extensions. Using a finite set of hedge instruments the method is directly implementable and it is shown how to operationalize the hedge in a jump-diffusion model with correlated stochastic volatility. The performance of the hedge is thoroughly studied and generic sources of hedge errors are addressed.

Suggested Citation

  • Morten Nalholm, 2005. "Static Hedging of Barrier Options under General Asset Dynamics: Unification and Application," FRU Working Papers 2005/08, University of Copenhagen. Department of Economics. Finance Research Unit.
  • Handle: RePEc:kud:kuiefr:200508

    Download full text from publisher

    File URL:
    Download Restriction: no

    More about this item

    NEP fields

    This paper has been announced in the following NEP Reports:


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:kud:kuiefr:200508. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Thomas Hoffmann). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.