Most option pricing models assume all parameters except volatility are fixed; yet they almost invariably change on re-calibration. This paper explains how to capture the model risk that arises when parameters that are assumed constant have calibrated values that change over time and how to use...

We study the empirical performance of the classical minimum-variance hedging strategy, comparing several econometric models for estimating hedge ratios of crude oil, gasoline and heating oil crack spreads. Given the great variability and large jumps in both spot and futures prices, great care is...

This paper presents an empirical study of hedging the four largest US index exchange traded funds (ETFs). When hedging each ETF position with its own index futures we find that it is difficult to improve on the naïve 1:1 futures hedge, that hedging is less effective around the time of dividend...

This paper investigates the optimal short-term hedging of Exchange Traded Fund (ETF) portfolios with index futures. Using daily data from May 2000 to December 2004 on the four largest passive ETFs (the Spider, the Diamond, the Cubes and the Russell iShare) and their corresponding index futures...