scholarly journals Valuing Exotic Options and Estimating Model Risk

2021 ◽  
Author(s):  
Jay Cao ◽  
Jacky Chen ◽  
John C. Hull ◽  
Zissis Poulos
Keyword(s):  
Exotic Options ◽  
Model Risk

HEDGING VOLATILITY RISK: THE EFFECTIVENESS OF VOLATILITY OPTIONS

2007 ◽  
Vol 10 (03) ◽  
pp. 517-534 ◽  
Author(s):  
YUNBI AN ◽  
ATA ASSAF ◽  
JUN YANG
Keyword(s):  
Model Misspecification ◽  
Exotic Options ◽  
European Options ◽  
Model Risk ◽  
Volatility Risk ◽  
Volatility Index ◽  
Hedging Strategies ◽  
Significant Difference ◽  
Hedging Performance ◽  
The Impact

In this paper we focus on the performance of volatility options as hedging instruments for hedging volatility risk. We investigate (a) the relative hedging performance of volatility and European options, (b) the relative hedging performance of volatility index and straddle options, and (c) the impact of model misspecification on hedging effectiveness. Our focus is on exotic options as the options to be hedged, because they are more sensitive to volatility risk and model risk and practically more relevant when the effectiveness of different hedging strategies is examined. Using a Monte Carlo simulation, we find that volatility options are especially useful for hedging options with a severe exotic feature and there is no significant difference between the performances of volatility index and straddle options. Furthermore, our results indicate that model misspecification has an important impact on the hedging performance.

Dynamic mean-variance portfolio analysis under model risk

2009 ◽  
Vol 12 (4) ◽  
pp. 91-115 ◽  
Author(s):  
Daniel Kuhn ◽  
Panos Parpas ◽  
Berç Rustem ◽  
Raquel Fonseca
Keyword(s):  
Portfolio Analysis ◽  
Model Risk ◽  
Mean Variance Portfolio ◽  
Mean Variance

A Practical Approach to Quantitative Model Risk Assessment

2020 ◽  
Author(s):  
Carole Bernard ◽  
Rodrigue Kazzi ◽  
Steven Vanduffel
Keyword(s):  
Risk Assessment ◽  
Quantitative Model ◽  
Practical Approach ◽  
Model Risk
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