Taking a portfolio perspective on option pricing and hedging, we show that within the standard Black …) hedging the total risk of each option separately, the correct hedge portfolio in discrete time eliminates linear (delta) as … indefinitely. This ties the literature on option pricing and hedging closer together with the APT literature in its focus on …

Nonparametric methods for estimating the implied volatility surface or the implied volatility smile are very popular …. The first step requires to extract implied volatility data from observed option prices, in the second step the actual … and less tractable. In this study, we propose a one-step estimator for the implied volatility surface based on a least …

In this paper we analyse the mean-variance hedging approach in an incomplete market under the assumption of additional … measures shrinks. Therefore, we obtain a modified mean-variance hedging problem, which takes into account the observed … obtain an explicit description of the optimal hedging strategy and an admissible, constrained variance-optimal signed …

, is the risk management of the embedded options by a tractable and realistic hedging strategy. The long maturity of life …--insurance products makes it necessary to lift the Black/Scholes assumptions and consider an uncertain volatility scenario, thus …

function of both assets. We solve the mean-variance hedging prob- lem completely and prove that the optimal strategy consists …

the Hedging Numeraire to equal the Market Portfolio and find the mean-variance efficient portfolios. …

are obtained and applied to numerically analyze the impact of the agents' risk aversion on the implied volatility of …

Market analysts and central banks often use the implied volatility of FX options as an indicator of expected exchange … deviate the value of implied volatility from the exchange rate variability expected by the market. These biasing factors are … one month. However, implied volatility provides a biased estimate, and does not encompass the information included in …