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Hedging Volatility Risk of Exotic Structures Using Variance Derivatives

Zarov, Iliyan Radev - 2012

volatility jump diffusion model …

Persistent link: https://www.econbiz.de/10013113731

Optimal Hedging Strategies for Options in Electricity Futures Markets

Hess, Markus - 2021

In this paper, we derive optimal hedging strategies for options in electricity futures markets. Optimality is measured in terms of minimal variance and the associated minimal variance hedging portfolios are obtained by a stochastic maximum principle. Our explicit results are particularly useful...

Persistent link: https://www.econbiz.de/10013232821

Consistent pricing and hedging volatility derivatives with two volatility surfaces

Chen, Mark Ke; Poon, Ser-Huang - 2013

Using the joint characteristic function of equity price and state variables, we can price contingent claims on both equity and VIX consistently. Based on linear approximation of jump size, we show that one factor models implies all VIX future contract of different maturities are perfectly...

Persistent link: https://www.econbiz.de/10010206962

Fourier Transform Algorithms for Pricing and Hedging Discretely Sampled Exotic Variance Products and Volatility Derivatives under Additive Processes

Zheng, Wendong - 2013

volatility derivatives under additive processes (time-inhomogeneous L evy processes). Our numerical algorithms are non … products and volatility derivatives. The exotic path dependency associated with the discretely sampled realized variance is … compute the hedge parameters of variance products and volatility derivatives. Numerical tests on pricing various variance …

Persistent link: https://www.econbiz.de/10013089214

An Orthogonal Series Expansions Method to Hedge and Price European-Type Options

Chan, Ron - 2017

volatility models. We provide a succinct error analysis to demonstrate that we can achieve an exponential convergence rate in the …

Persistent link: https://www.econbiz.de/10012967806

Hedging of Asian Options under Exponential Lévy Models : Computation and Performance

Ballotta, Laura - 2019

In this paper we consider the problem of hedging an arithmetic Asian option with discrete monitoring in an exponential Lévy model by deriving backward recursive integrals for the price sensitivities of the option. The procedure is applied to the analysis of the performance of the delta and...

Persistent link: https://www.econbiz.de/10012905619

Dynamic Jump Intensities and Risk Premiums in Crude Oil Futures and Options Markets

Christoffersen, Peter F. - 2020

Options on crude oil futures are the most actively traded commodity options. We develop a class of computationally efficient discrete-time jump models that allow for closed-form option valuation, and we use crude oil futures and options data to investigate the economic importance of jumps and...

Persistent link: https://www.econbiz.de/10012850215

Hedging and Pricing Early-Exercise Options With Complex Fourier Series Expansion

Chan, Ron - 2018

We introduce a new numerical method called the complex Fourier series (CFS) method proposed by Chan (2017) to price options with an early-exercise feature — American, Bermudan and discretely monitored barrier options — under exponential Lévy asset dynamics. This new method allows us to...

Persistent link: https://www.econbiz.de/10012929336

The term structure of the price of variance risk

Andries, Marianne; Eisenbach, Thomas M.; Schmalz, Martin C. - 2015

straddles; second, we estimate the PVR in a Heston (1993) stochastic-volatility model. In both cases, the estimation is … more negative and its term structure is steeper when volatility is high. These findings are inconsistent with calibrations …

Persistent link: https://www.econbiz.de/10011303715

GARCH Pricing and Hedging of VIX Options

Liu, Qiang; Jiao, Yuhan; Guo, Shuxin - 2022

We are the first to study the pricing and hedging of VIX options via Monte Carlo (MC) under GARCH(1,1) and Glosten–Jagannathan–Runkle GARCH(1,1) models. Our pricing is ab initio and out‐of‐sample and can be implemented in real time. Importantly, we propose the so‐called single‐option...

Persistent link: https://www.econbiz.de/10013404075