Delta-Hedging and Variance Swap Replication

2019 ◽  
Author(s):  
Frido Rolloos
Keyword(s):  
Variance Swap ◽  
Delta Hedging

scholarly journals HEDGING EUROPEAN DERIVATIVES WITH THE POLYNOMIAL VARIANCE SWAP UNDER UNCERTAIN VOLATILITY ENVIRONMENTS

2011 ◽  
Vol 14 (04) ◽  
pp. 485-505 ◽  
Author(s):  
AKIHIKO TAKAHASHI ◽  
YUKIHIRO TSUZUKI ◽  
AKIRA YAMAZAKI
Keyword(s):  
Asset Price ◽  
Minimum Variance ◽  
Test Cases ◽  
Volatility Risk ◽  
Underlying Asset ◽  
Variance Swap ◽  
Black Scholes ◽  
Uncertain Volatility ◽  
Dynamic Trading ◽  
Delta Hedging

This paper proposes a new hedging scheme of European derivatives under uncertain volatility environments, in which a weighted variance swap called the polynomial variance swap is added to the Black-Scholes delta hedging for managing exposure to volatility risk. In general, under these environments one cannot hedge the derivatives completely by using dynamic trading of only an underlying asset owing to volatility risk. Then, for hedging uncertain volatility risk, we design the polynomial variance, which can be dependent on the level of the underlying asset price. It is shown that the polynomial variance swap is not perfect, but more efficient as a hedging tool for the volatility exposure than the standard variance swap. In addition, our hedging scheme has a preferable property that any information on the volatility process of the underlying asset price is unnecessary. To demonstrate robustness of our scheme, we implement Monte Carlo simulation tests with three different settings, and compare the hedging performance of our scheme with that of standard dynamic hedging schemes such as the minimum-variance hedging. As a result, it is found that our scheme outperforms the others in all test cases. Moreover, it is noteworthy that the scheme proposed in this paper continues to be robust against model risks.

An Analytic Formula for the Delta of Variance Swap

2008 ◽  
Author(s):  
Benoit Coulombe ◽  
Alexander Marini ◽  
Ararat Yesayan
Keyword(s):  
Analytic Formula ◽  
Variance Swap

Is the Variance Swap Rate Affine in the Spot Variance? Evidence From S&P500 Data

2020 ◽  
Author(s):  
Maria Elvira Mancino ◽  
Simone Scotti ◽  
Giacomo Toscano
Keyword(s):  
Variance Swap

Delta Hedging and Volatility-Price Elasticity: A Two-Step Approach

2020 ◽  
Author(s):  
Peng Zhu ◽  
Kun Xia ◽  
Xuewei Yang
Keyword(s):  
Price Elasticity ◽  
Delta Hedging

Delta Hedging IO Securities Backed by Senior Life Settlements

2009 ◽  
Vol 15 (2) ◽  
pp. 93-100 ◽  
Author(s):  
Charles A Stone ◽  
Anne Zissu
Keyword(s):  
Life Settlements ◽  
Delta Hedging

Discrete variance swap in a rough volatility economy

2021 ◽  
Author(s):  
Yiru Xi ◽  
Hoi Ying Wong
Keyword(s):  
Variance Swap ◽  
Rough Volatility

Variance swap dynamics

2013 ◽  
Vol 13 (5) ◽  
pp. 675-685 ◽  
Author(s):  
K. Detlefsen ◽  
W. K. Härdle
Keyword(s):  
Variance Swap

scholarly journals Variance swap volatility dispersion

2006 ◽  
Vol 11 (4) ◽  
pp. 334-344 ◽  
Author(s):  
Izzy Nelken
Keyword(s):  
Variance Swap
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