Abstract
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.
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 language | English |
|---|---|
| Title of host publication | [Host publication title missing] |
| Publisher | BMRC-QASS |
| Publication status | Published - 2013 |
| Event | 8th BMRC - QASS Conference on Macro and Financial Economics - London Duration: 2013 May 23 → … |
Conference
| Conference | 8th BMRC - QASS Conference on Macro and Financial Economics |
|---|---|
| Period | 2013/05/23 → … |
Subject classification (UKÄ)
- Probability Theory and Statistics
Free keywords
- Option Valuation
- Calibration
- Non-linear Kalman filter
- Quadratic hedging