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DeltaHedged Gains and the Negative Market Volatility Risk Premium
 The Review of Financial Studies
, 2001
"... We investigate whether the volatility risk premium is negative by examining the statistical properties of deltahedged option portfolios (buy the option and hedge with stock). Within a stochastic volatility framework, we demonstrate a correspondence between the sign and magnitude of the volatility r ..."
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Cited by 122 (5 self)
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We investigate whether the volatility risk premium is negative by examining the statistical properties of deltahedged option portfolios (buy the option and hedge with stock). Within a stochastic volatility framework, we demonstrate a correspondence between the sign and magnitude of the volatility
Option pricing when underlying stock returns are discontinuous
 Journal of Financial Economics
, 1976
"... The validity of the classic BlackScholes option pricing formula dcpcnds on the capability of investors to follow a dynamic portfolio strategy in the stock that replicates the payoff structure to the option. The critical assumption required for such a strategy to be feasible, is that the underlying ..."
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Cited by 1001 (3 self)
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The validity of the classic BlackScholes option pricing formula dcpcnds on the capability of investors to follow a dynamic portfolio strategy in the stock that replicates the payoff structure to the option. The critical assumption required for such a strategy to be feasible, is that the underlying
Deltahedging vega risk
 Journal Of Quantitative Finance
"... In this article we compare the Profit and Loss arising from the deltaneutral dynamic hedging of options, using two possible values for the delta of the option. The first one is the Black– Scholes implied delta, while the second one is the local delta, namely the delta of the option in a generalized ..."
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Cited by 1 (0 self)
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In this article we compare the Profit and Loss arising from the deltaneutral dynamic hedging of options, using two possible values for the delta of the option. The first one is the Black– Scholes implied delta, while the second one is the local delta, namely the delta of the option in a
Deltahedging Correlation Risk?
, 2010
"... The Gaussian copula model is essentially a static quotation device, and its use for hedging is, in principle, questionable. The Gaussian copula delta thus assumes a constant tranche correlation, whereas in practice this correlation is dynamic, and correlated in particular to the credit index. It mig ..."
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Cited by 1 (0 self)
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: the market or Gaussian copula delta, and the local intensity delta, where the latter refers to the delta in a local intensity default model of portfolio credit risk, recalibrated to the market every day. A theoretical analysis is illustrated by data analysis and backtesting hedging experiments based on both
The Determinants of Credit Spread Changes.
 Journal of Finance
, 2001
"... ABSTRACT Using dealer's quotes and transactions prices on straight industrial bonds, we investigate the determinants of credit spread changes. Variables that should in theory determine credit spread changes have rather limited explanatory power. Further, the residuals from this regression are ..."
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Cited by 422 (2 self)
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regression beyond the region where actual option prices are most typically observed. Note that if there is a nonnegligible probability of large negative jumps in firm value, then the appropriate hedging tool for corporate debt may not be the firm's equity, but rather deep outofthemoney puts
DeltaHedging a Hydropower Plant Using Stochastic Programming
"... ∗ Abstract An important challenge for hydropower producers is to optimize reservoir discharges, which is subject to uncertainty in inflow and electricity prices. Furthermore, the producers want to hedge the risk in the operating profit. This article demonstrates how stochastic programming can be u ..."
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Cited by 1 (0 self)
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be used to solve a multireservoir hydro scheduling case for a pricetaking producer, and how such a model can be employed in subsequent deltahedging of the electricity portfolio.
Black Scholes for Portfolios of Options in Discrete Time
"... Taking a portfolio perspective on option pricing and hedging, we show that within the standard BlackScholesMerton framework large portfolios of options can be hedged without risk in discrete time. The nature of the hedge portfolio in the limit of large portfolio size is substantially different fr ..."
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from the standard continuous time deltahedge. The underlying values of the options in our framework are driven by systematic and idiosyncratic risk factors. Instead of linearly (delta) hedging the total risk of each option separately, the correct hedge portfolio in discrete time eliminates linear
When You Hedge Discretely: Optimization of Sharpe Ratio for DeltaHedging Strategy under Discrete Hedging and Transaction Costs
, 2013
"... We consider the deltahedging strategy for a vanilla option under the discrete hedging and transaction costs, assuming that an option is deltahedged using the BlackScholesMerton model with the lognormal volatility implied by the market price of the option. We analyze the expected profitandlos ..."
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We consider the deltahedging strategy for a vanilla option under the discrete hedging and transaction costs, assuming that an option is deltahedged using the BlackScholesMerton model with the lognormal volatility implied by the market price of the option. We analyze the expected profit
Risks and Portfolio Decisions involving Hedge Funds
, 2002
"... Hedge funds are known to exhibit nonlinear optionlike exposures to standard asset classes and therefore the traditional linear factor model provides limited help in capturing their riskreturn tradeoffs. We address this problem by augmenting the traditional model with optionbased risk factors. O ..."
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Cited by 235 (22 self)
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Hedge funds are known to exhibit nonlinear optionlike exposures to standard asset classes and therefore the traditional linear factor model provides limited help in capturing their riskreturn tradeoffs. We address this problem by augmenting the traditional model with optionbased risk factors
Improving the Deltahedging riskadjusted performance: the standard VG volatility space model
, 2009
"... This paper provides a comparison of the Deltahedging strategy under the BlackScholes model and under a particular VG space volatility model, the socalled standard VG space model. This model is obtained by replacing the standard Normal distribution by the symmetric VG distribution with a parameter ..."
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This paper provides a comparison of the Deltahedging strategy under the BlackScholes model and under a particular VG space volatility model, the socalled standard VG space model. This model is obtained by replacing the standard Normal distribution by the symmetric VG distribution with a
Results 1  10
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1,357