Models in financial economics derived from no-arbitrage assumptions are standard fare among theoreticians and practitioners. However, several authors have investigated the impact of short lived arbitrage on European options using models borrowed from disequilibria in physics. In this paper, we...

We evaluate the performance of delta, delta-gamma and delta-vega hedges on the S%P 500 futures options with a particular focus on importance of daily volatility updating and the use of price-change implied volatility. Our findings indicate that the hedging performance of Black's model improves...

The VIX has traditionally been considered a forward indicator of realised volatility. This follows from its original formulation as the implied volatility of an option on the S%P 100 index and its later incarnation based on the fair price of a realised volatility swap. We focus on the related...