Regime-dependent smile-adjusted delta hedging

2011 ◽  
Vol 32 (3) ◽  
pp. 203-229 ◽  
Author(s):  
Carol Alexander ◽  
Alexander Rubinov ◽  
Markus Kalepky ◽  
Stamatis Leontsinis
Keyword(s):  
Delta Hedging

Delta Hedging IO Securities Backed by Senior Life Settlements

2009 ◽  
Vol 15 (2) ◽  
pp. 93-100 ◽  
Author(s):  
Charles A Stone ◽  
Anne Zissu
Keyword(s):  
Life Settlements ◽  
Delta Hedging

scholarly journals Options Delta Hedging with No Options at All

2014 ◽  
Author(s):  
Juliusz Jablecki ◽  
Ryszard Kokoszczynski ◽  
Pawel Sakowski ◽  
Robert Slepaczuk ◽  
Piotr Wojcik
Keyword(s):  
Delta Hedging

scholarly journals Robustness of Delta Hedging for Path-Dependent Options in Local Volatility Models

2007 ◽  
Vol 44 (04) ◽  
pp. 865-879 ◽  
Author(s):  
Alexander Schied ◽  
Mitja Stadje
Keyword(s):  
Payoff Function ◽  
Hedging Strategy ◽  
Local Volatility ◽  
Directional Convexity ◽  
Volatility Models ◽  
Local Volatility Model ◽  
Volatility Model ◽  
Black Scholes ◽  
Delta Hedging ◽  
Path Dependent

We consider the performance of the delta hedging strategy obtained from a local volatility model when using as input the physical prices instead of the model price process. This hedging strategy is called robust if it yields a superhedge as soon as the local volatility model overestimates the market volatility. We show that robustness holds for a standard Black-Scholes model whenever we hedge a path-dependent derivative with a convex payoff function. In a genuine local volatility model the situation is shown to be less stable: robustness can break down for many relevant convex payoffs including average-strike Asian options, lookback puts, floating-strike forward starts, and their aggregated cliquets. Furthermore, we prove that a sufficient condition for the robustness in every local volatility model is the directional convexity of the payoff function.

Optimal delta-hedging under transactions costs

1997 ◽  
Vol 21 (8-9) ◽  
pp. 1353-1376 ◽  
Author(s):  
Les Clewlow ◽  
Stewart Hodges
Keyword(s):  
Transactions Costs ◽  
Delta Hedging

Dynamic Delta Hedging

2010 ◽  
Vol 6 (4) ◽  
pp. 139-154
Author(s):  
Satyendra Kumar Sharma ◽  
Arun Kumar Vaish ◽  
Rajan Pandey ◽  
Charu Gupta
Keyword(s):  
Delta Hedging

Arbitrage Pricing

2019 ◽  
pp. 95-118
Author(s):  
Tomas Björk
Keyword(s):  
Continuous Time ◽  
Implied Volatility ◽  
Futures Contracts ◽  
Martingale Measures ◽  
Bank Account ◽  
No Arbitrage ◽  
Black Scholes Model ◽  
Black Scholes ◽  
Financial Derivative ◽  
Delta Hedging

The chapter starts with a detailed discussion of the bank account in discrete and continuous time. The Black–Scholes model is then introduced, and using the principle of no arbitrage we study the problem of pricing an arbitrary financial derivative within this model. Using the classical delta hedging approach we derive the Black–Scholes PDE for the pricing problem and using Feynman–Kač we also derive the corresponding risk neutral valuation formula and discuss the connection to martingale measures. Some concrete examples are studied in detail and the Black–Scholes formula is derived. We also discuss forward and futures contracts, and we derive the Black-76 futures option formula. We finally discuss the concepts and roles of historic and implied volatility.

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