preference parameters. This paper also shows that stochastic variation in volatility produces an optimal intertemporal hedging … market shows that empirically this correlation is negative and large, which implies a negative hedging demand for stocks … hedging demands by long-term, risk averse investors. A comparative statics exercise shows that the size of hedging demands is …

This paper develops a method for option hedging which is consistent with time-varying preferences and probabilities … the spread between implied and objective volatilities. Hedging results reveal that typical hedging techniques for out …-of-the-money S&P500 index options, such as Black-Scholes or historical minimum variance hedging, are inferior to the EPK hedging …

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 …