{"title":"Delta-Hedging and Variance Swap Replication","authors":"Frido Rolloos","doi":"10.2139/ssrn.3442808","DOIUrl":null,"url":null,"abstract":"Papers treating variance swap replication often mention that the replicating portfolio consists of a static position in an appropriately weighted continuous strip of options, and a dynamic position in the underlying asset that can be regarded as the delta-hedge of the strip of options. Most papers, however, do not explicate the impact of delta-hedging the options, and in particular do not mention what volatility to use when delta-hedging the options. Although no new results are derived, in this educational note we clarify the aforementioned two points.","PeriodicalId":293888,"journal":{"name":"Econometric Modeling: Derivatives eJournal","volume":"1 1","pages":"0"},"PeriodicalIF":0.0000,"publicationDate":"2019-08-26","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":"0","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"Econometric Modeling: Derivatives eJournal","FirstCategoryId":"1085","ListUrlMain":"https://doi.org/10.2139/ssrn.3442808","RegionNum":0,"RegionCategory":null,"ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"","JCRName":"","Score":null,"Total":0}
引用次数: 0
Abstract
Papers treating variance swap replication often mention that the replicating portfolio consists of a static position in an appropriately weighted continuous strip of options, and a dynamic position in the underlying asset that can be regarded as the delta-hedge of the strip of options. Most papers, however, do not explicate the impact of delta-hedging the options, and in particular do not mention what volatility to use when delta-hedging the options. Although no new results are derived, in this educational note we clarify the aforementioned two points.
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