Details

Autor(en) / Beteiligte

• Iyer, Srikanth K.
• Nanda, Seema
• Kumar, Swapnil

Titel

An Empirical Comparison of Two Stochastic Volatility Models using Indian Market Data

Ist Teil von

• Asia-Pacific financial markets, 2013-09, Vol.20 (3), p.243-259

Ort / Verlag

Tokyo: Springer Japan

Erscheinungsjahr

2013

Quelle

Alma/SFX Local Collection

Beschreibungen/Notizen

• We conduct an empirical comparison of hedging strategies for two different stochastic volatility models proposed in the literature. One is an asymptotic expansion approach and the other is the risk-minimizing approach applied to a Markov-switched geometric Brownian motion. We also compare these with the Black–Scholes delta hedging strategies using historical and implied volatilities. The derivatives we consider are European call options on the NIFTY index of the Indian National Stock Exchange. We compare a few cases with profit and loss data from a trading desk. We find that for the cases that we analyzed, by far the better results are obtained for the Markov-switched geometric Brownian motion.