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Simultaneous Calibration and Quadratic Hedging of Options

Published in 2013 by Erik Lindström, Jingyi Guo
This paper was not found in any repository; the policy of its publisher is unknown or unclear.
This paper was not found in any repository; the policy of its publisher is unknown or unclear.

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Preprint: policy unknown
Question mark in circle
Postprint: policy unknown
Question mark in circle
Published version: policy unknown

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.