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Persistent link: https://www.econbiz.de/10012543248
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 …, but diversified. Our result shows that preference free valuation of option portfolios using linear assets only is …
Persistent link: https://www.econbiz.de/10010324983
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 …, but diversified. Our result shows that preference free valuation of option portfolios using linear assets only is …
Persistent link: https://www.econbiz.de/10011334345
are calibrated afresh each day for each option maturity. We present results for options on the S&P 100, the Dow Jones …
Persistent link: https://www.econbiz.de/10012971072
This paper derives optimal perfect hedging portfolios in the presence of transaction costs within the binomial model of stock returns, for a market maker that establishes bid and ask prices for American call options on stocks paying dividends prior to expiration.(...)
Persistent link: https://www.econbiz.de/10005843146
We investigate the effect of including variance derivatives as calibration and hedging instruments for pricing and hedging exotic structures. This is studied empirically using market data for SPX and VIX derivatives applied in a stochastic volatility jump diffusion model
Persistent link: https://www.econbiz.de/10013113731
We conduct an extensive empirical analysis of VIX derivative valuation models before, during and after the 2008-2009 financial crisis. Since the restrictive mean reversion and heteroskedasticity features of existing models yield large distortions during the crisis, we propose generalisations...
Persistent link: https://www.econbiz.de/10013100507
terminal value approximates the pay-off of the call option. In subsequent studies, Lott, Kabanov and Safarian, and Gamys and …
Persistent link: https://www.econbiz.de/10013107812
We consider the problem of how to price and hedge derivatives on underlyings that trade on exchanges with no overlap in opening hours. For a simple two-stock model we derive the dynamics of closing prices, show how they can be simulated efficiently and what value we should put into pricing...
Persistent link: https://www.econbiz.de/10013085397
of multi-factor model, we demonstrate how to calculate the optimal hedging ratio for VIX future to hedge VIX option. We …
Persistent link: https://www.econbiz.de/10013088143