The Black-Scholes framework implies a constant volatility across term and strike, and a lognormal distribution for … and apply a model-independent, historically-consistent method for estimating the ‘fair' volatility surface of an asset … characteristics investors should be concerned with; (2) A review of historic SA index volatility skews and term structure, their …

We propose different schemes for option hedging when asset returns are modeled using a general class of GARCH models … probability measure in this setting, we construct local risk minimization hedging strategies with respect to a pricing kernel … schemes. We also test the sensitivity of the hedging strategies with respect to the risk neutral measure used by recomputing …

We study the pricing and hedging of derivative securities with uncertainty about the volatility of the underlying asset … "distance" to a reference local volatility model. In the limit for small uncertainty aversion, this leads to explicit formulas … for prices and hedging strategies in terms of the security's cash gamma …

We introduce a new method to price American-style options on underlying investments governed by stochastic volatility … (SV) models. The method does not require the volatility process to be observed. Instead, it exploits the fact that the … distributions of volatility, given observed data. By constructing statistics summarizing information about these conditional …

used to implement a stochastic implied volatility model in the following two steps:1) Train a market simulator for option … minimal entropy martingale measure.The resulting model can be used for risk-neutral pricing, or for Deep Hedging in the case …

) Markovian setup. In particular we analyse the hedging performance of the original architecture under rough volatility models …We investigate the performance of the Deep Hedging framework under training paths beyond the (finite dimensional … architectures capable of capturing the non-Markoviantity of time-series. Secondly, we analyse the hedging behaviour in these models …

stochastic volatility process with asset return and volatility jumps. In this note, we prove that Lin and Chang's formula is not …

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 …

and Heston's stochastic volatility model. Leveraging a total of five years of individual equity and index option data, and …-of-sample hedging errors than competing models. This comparison includes versions of Markov Tree and Black-Scholes models in which … accurate and less risky single instrument hedges than Heston's stochastic volatility model. A statistical resampling method …

This paper investigates the use of the asymptotic Heston solution in locally risk minimizing hedging. The asymptotic …