This paper proposes a new hedging scheme of European derivatives under uncertain volatility environments, in which a weighted variance swap called the polynomial variance swap is added to the Black-Scholes delta hedging for managing exposure to volatility risk. In general, under these...

This paper proposes a new scheme for static hedging of European path-independent derivatives under stochastic volatility models. First, we show that pricing European path-independent derivatives under stochastic volatility models is transformed to pricing those under one-factor local volatility...

This paper proposes a new approximation formula for pricing average options under Heston's stochastic volatility model. When using the formula based on the Gram-Charlier expansion, it is necessary to know any moments of an averaged underlying asset price. We try to derive an analytical solution...