Continuation of Mathematical Finance 1 (Discrete-Time Models). Pricing and hedging of derivatives that do not admit a unique arbitrage-free price.

Realistic models of financial markets are typically incomplete, and the interval of arbitrage-free prices of a non-replicable claim is usually to large for practical purposes. For this case, several approaches to pricing and hedging are presented: Super-hedging, super-hedging with options, quantile hedging, hedging with convex risk measures, minimal martingale measures, variance optimal hedging.