Using the short-lived arbitrage model to compute minimum variance hedge ratios: application to indices, stocks and commodities

The short-lived arbitrage model has been shown to significantly improve in-sample option pricing fit relative to the Black-Scholes model. Motivated by this model, we imply both volatility and virtual interest rates to adjust minimum variance hedge ratios. Using several error metrics, we find that th...

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Veröffentlicht in:	Quantitative finance 2021, Vol.21 (1), p.125-142
Hauptverfasser:	Hilliard, Jimmy E., Hilliard, Jitka, Ni, Yinan
Format:	Artikel
Sprache:	eng
Schlagworte:	Arbitrage Hedge ratios Implied parameters Interest rates Practitioner Black-Scholes Short-lived arbitrage
Online-Zugang:	Volltext
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