Optimal delta hedging for options
研究发现标准Delta无法最小化头寸价值波动，因为资产价格与波动率变动相关；本文基于S&P 500等期权数据，构建了最小方差Delta模型，优于每日重新校准的随机波动率模型。
As has been pointed out by a number of researchers, the normally calculated delta does not minimize the variance of changes in the value of a trader's position. This is because there is a non-zero correlation between movements in the price of the underlying asset and movements in the asset's volatility. The minimum variance delta takes account of both price changes and the expected change in volatility conditional on a price change. This paper determines empirically a model for the minimum variance delta. We test the model using data on options on the S&P 500 and show that it is an improvement over stochastic volatility models, even when the latter are calibrated afresh each day for each option maturity. We also present results for options on the S&P 100, the Dow Jones, individual stocks, and commodity and interest-rate ETFs.