Asymptotic Protection: The Simultaneous Remedy and Poison of Risk Management—The Hedging Paradox

Abstract Perfect hedging promises complete protection against financial risk, yet mathematical proofs establish fundamental limitations. This paper synthesizes evidence across financial theory, market microstructure, systemic risk, political economy, and cryptocurrency markets to examine how theoretical hedging impossibility manifests in empirical pricing patterns and wealth concentration. Key Findings Hedging as pharmakon: Derivatives simultaneously remedy and poison—building on Derrida's concept, hedging's dual nature stems from incomplete markets creating pricing ambiguity Empirical barriers: Dealer markups reaching 25-fold spreads; collateral costs exceeding benefits above 70% hedge ratios; top-10 dealers controlling 73% of CDS markets Cross-country evidence: Positive correlation between derivatives usage and wealth inequality across 16 countries Case studies: Southwest Airlines ($1B collateral burden), Luna-UST $50B collapse, petrostate currency pegs enabling offshore positioning Policy proposals: Mandatory cost decomposition, concentration registries, public hedging options, AML extension to hedging-based transfers Links PhilPapers: philpapers.org/rec/FARAPS-2 ASCRI: systems.ac/2/DAI-2502 Research Lab: Dissensus AI