Arbeitspapier
Consistent pricing and hedging volatility derivatives with two volatility surfaces
Using the joint characteristic function of equity price and state variables, we can price contingent claims on both equity and VIX consistently. Based on linear approximation of jump size, we show that one factor models implies all VIX future contract of different maturities are perfectly correlated in contrast to market observations. In the examples of multi-factor model, we demonstrate how to calculate the optimal hedging ratio for VIX future to hedge VIX option. We derived the unconditional correlation term structure of VIX future implied by the model based on the stationary distribution of state variables. We show multifactor models that are calibrated to the two voaltility surfaces will produce very different hedge ratios for VIX options.
- Sprache
-
Englisch
- Erschienen in
-
Series: Manchester Business School Working Paper ; No. 635
- Klassifikation
-
Wirtschaft
Asset Pricing; Trading Volume; Bond Interest Rates
Contingent Pricing; Futures Pricing; option pricing
- Thema
-
SPX Volatility Surface
VIX Volatility Surface
VIX Futures
VIX Options
Hedge Ratio
- Ereignis
-
Geistige Schöpfung
- (wer)
-
Chen, Ke
Poon, Ser-Huang
- Ereignis
-
Veröffentlichung
- (wer)
-
The University of Manchester, Manchester Business School
- (wo)
-
Manchester
- (wann)
-
2013
- Handle
- Letzte Aktualisierung
-
10.03.2025, 11:47 MEZ
Datenpartner
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. Bei Fragen zum Objekt wenden Sie sich bitte an den Datenpartner.
Objekttyp
- Arbeitspapier
Beteiligte
- Chen, Ke
- Poon, Ser-Huang
- The University of Manchester, Manchester Business School
Entstanden
- 2013
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