Static hedges for reverse barrier options with robustness against skew risk : an empirical analysis
Journal
Quantitative Finance
ISSN
1469-7688
ISSN-Digital
1469-7696
Type
journal article
Date Issued
2011-05-01
Author(s)
Abstract
We conduct an empirical evaluation of a static super-replicating hedge of barrier options. The hedge is robust to uncertainty about the future skew. Using almost seven years of current data on the DAX, we evaluate the performance of the hedge and compare it with those of both a dynamic and a static replicating hedge. The main result is that the robustness of the static super-replicating portfolio is also empirically confirmed in practice such that the hedge sets an upper bound for the price of skew risk for barrier options.
Language
English
Keywords
Barrier options
Static hedging
Skew risk
HSG Classification
contribution to scientific community
Refereed
Yes
Publisher
Taylor&Francis
Publisher place
London UK
Volume
11
Number
5
Start page
711
End page
727
Pages
17
Subject(s)
Eprints ID
120304
File(s)![Thumbnail Image]()
open.access
Name
main.pdf
Size
397.66 KB
Format
Adobe PDF
Checksum (MD5)
bbe73016f017a8edad012a357a3c8562