Asymptotic Protection: The Simultaneous Remedy and Poison of Risk Management

Abstract

Complete hedging is theoretically impossible under incomplete markets (Harrison-Kreps 1979), yet partial hedging extracts systematic rents through necessity taxes. This paper synthesizes theoretical impossibility results with empirical evidence of wealth extraction mechanisms, demonstrating that derivatives markets simultaneously provide protection and transfer wealth from those seeking safety to sophisticated counterparties.

Suggested Citation

BibTeX

@misc{farzulla2025_asymptotic_protection,
  author       = {Farzulla, Murad},
  title        = {Asymptotic Protection: The Simultaneous Remedy and Poison of Risk Management},
  year         = {2025},
  howpublished = {ASCRI Working Paper DAI-2502},
  doi          = {10.5281/zenodo.17620448},
  url          = {https://systems.ac/2/DAI-2502}
}

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