Before revision: We develop a new method for hedging derivatives based on the premise that a hedger should not always rely on a universal set of trading instruments that are used to form a linear portfolio of the stock, riskless bond and standard derivatives, but rather should design a set of specific, most suited financial instruments for the hedging problem.
After revision: We develop a new method for hedging derivatives based on the premise that a hedger should not always rely on a universal set of trading instruments that are used to form a linear portfolio comprised of the risky asset, the riskless asset, and standard derivatives, but rather should design a set of specific, most suited financial instruments for the hedging problem.