estimation period may be preferable to estimating specification parameters from all available observations. Finally, the hedging …

using transactions data. We propose a new market microstructure theory which we call derivative hedge theory, in which … volume as a measure of liquidity and supports the derivative hedge theory. Option market spreads are positively related to …

This paper develops a method for option hedging which is consistent with time-varying preferences and probabilities … one-day ahead forecast of derivative price distributions and minimum variance hedge ratios. Empirical results suggest that … the spread between implied and objective volatilities. Hedging results reveal that typical hedging techniques for out …

This paper addresses the issue of hedging option positions when the underlying asset exhibits stochastic volatility. By … parameterizing the volatility process as GARCH, and utilizing risk- neutral valuation, we estimate hedging parameters (delta and … gamma) using Monte-Carlo simulation. We estimate hedging parameters for options on the Standard and Poor's 500 index, a bond …