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- 6/11/10
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Suppose you need to hedge an exotic option without any frequently traded vanilla option as means, and all you have is a money account and stock, then which model would you choose - simple Black-Scholes, CEV modification, Hull White or Heston Stochastic Volatility type, or Jump Diffusion?
I came across many textbooks, but the models' goal seems to explain the volatility surface in the market. However, a real hedger's goal is to beat the market or produce something not exist in the market, otherwise why hedge?
I came across many textbooks, but the models' goal seems to explain the volatility surface in the market. However, a real hedger's goal is to beat the market or produce something not exist in the market, otherwise why hedge?