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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
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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
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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
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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
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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
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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
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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
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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
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Selling VIX Futures and Options for Portfolio Return Enhancement
Szado, Edward - 2019
strong performance for VIX futures selling or VIX call writing strategies. However, the high volatility of volatility and … selling of VIX instruments could have substantial volatility jump risk exposure which can result in economically meaningful … buys VIX calls – had lower volatility and less severe maximum drawdowns than the stock and commodity benchmark indexes …
Persistent link: https://www.econbiz.de/10012870103
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Hedging Market Risk and Volatility : Evidence from Indian Options Market
Thomas, Sony - 2015
The paper examines the performance of various hedging strategies using Options in the Indian options market. The entire spectrum of option hedging strategies are divided into two categories: 1) Strategies with limited losses and unlimited gains; 2) Strategies with limited losses and limited...
Persistent link: https://www.econbiz.de/10013025217