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 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 …

derivatives in a stochastic volatility model with jumps. This is motivated by the recent developments of the VIX derivatives … exposure to the volatility risk as compared to equity derivatives. Based on the closed-form formula. we determine explicitly …