Simultaneous Calibration and Quadratic Hedging of Options

Erik Lindström, Guo Jingyi

Research output: Chapter in Book/Report/Conference proceedingPaper in conference proceedingpeer-review


We derive a sequential algorithm for simultaneous calibration and quadratic hedging of options.
It can be applied to any model from which we can simulate paths and price options. The quadratic
hedging comes at no extra cost!
We have calibrated the Bates and NIG-CIR model to S&P 500 index options in order to evaluate
various hedging strategies (delta, quadratic), clearly indicating the advantage of quadratic hedging
over delta hedging.
Original languageEnglish
Title of host publication[Host publication title missing]
Publication statusPublished - 2013
Event8th BMRC - QASS Conference on Macro and Financial Economics - London
Duration: 2013 May 23 → …


Conference8th BMRC - QASS Conference on Macro and Financial Economics
Period2013/05/23 → …

Subject classification (UKÄ)

  • Probability Theory and Statistics

Free keywords

  • Option Valuation
  • Calibration
  • Non-linear Kalman filter
  • Quadratic hedging


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