Search results with tag "The volatility"

Managing Smile Risk

Key words. smiles, skew, dynamic hedging, stochastic vols, volga, vanna 1 Introduction European options are often priced and hedged using Black’s model, or, equivalently, the Black-Scholes model. In Black’s model there is a one-to-one relation between the price of a European option and the volatility …

  Volatility, Hedging, Skew, The volatility