of options in terms of market value or volatility exposure is small, which may pose a challenge to models that invoke …

model and the expected level of the volatility swap. The simulated path space is also used to price and statically hedge … equity and volatility linked notes. The hedge is further enhanced by delta strategies extracted by an application of the SPSA … the desirability of zero cost hedging with a view to lowering the ask price required to make the unhedged risk acceptable …

This paper studies the pricing and hedging problem of European plain vanilla options in a modified Black–Scholes market …) and will be discussed. Moreover, the worst case prices explain the volatility smile which can be observed in market data …

With the innovation of derivatives, the Standard and Poor's (S&P) 500 index -- as an underlying asset of the volatility …. Since the financial crisis of 2008, the degree of market volatility has increased substantially. In addition, a random … different hedging strategies based on different diffusion models …

We investigate the feedback effect of option hedging activity on the stability of the price of the underlying. While … previous literature has focused on the effect of hedging activity on the volatility of the underlying, this paper focuses on … (depending on the option parameters and its delta) when option hedging is present, in line with the predictions of our model …

Numerous empirical proofs indicate the adequacy of the time discrete auto-regressive stochastic volatility models … introduced by Taylor in the dynamical description of the log-returns of financial assets. The pricing and hedging of contingent … corresponding market and the non-observability of the associated volatility process. In this paper we introduce new pricing kernels …

We develop efficient fast Fourier transform algorithms for pricing and hedging discretely sampled variance products and … 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 …

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 for electricity retailers, who have sold an option to a client, and now …