Advances in Risk Management

356 MODEL SELECTION AND HEDGING OF FINANCIAL DERIVATIVES a number of tradable (non-redundant) securities, typically liquid vanil ...

GIUSEPPE DI GRAZIANO AND STEFANO GALLUCCIO 357 18.3 Analytical expression of the total hedging error Consider the following situ ...

358 MODEL SELECTION AND HEDGING OF FINANCIAL DERIVATIVES The main idea of the proof is the following. At any timet≤T, build a po ...

GIUSEPPE DI GRAZIANO AND STEFANO GALLUCCIO 359 second derivative of the claim respect to the asset,∂ (^2) Cs ∂S^2. This is analo ...

360 MODEL SELECTION AND HEDGING OF FINANCIAL DERIVATIVES volatility model but he assumes that the Brownian motions are uncorre- ...

GIUSEPPE DI GRAZIANO AND STEFANO GALLUCCIO 361
0.50 0.00 0.50 1.00 1.50 2.00 2.50 3.00 3.50 4.00
100%
80%
60%
40%
20% 0% 20% 4 ...

362 MODEL SELECTION AND HEDGING OF FINANCIAL DERIVATIVES
5 0 5 10 15 20 25 30 35 40 45
20%
15%
10%
5% 0% 5% 10% 15% 20% Ga ...

GIUSEPPE DI GRAZIANO AND STEFANO GALLUCCIO 363 We immediately notice that large errors are now less likely when compared to the ...

364 MODEL SELECTION AND HEDGING OF FINANCIAL DERIVATIVES REFERENCES Andersen, L. andAndreasen, J. (2000a) “Jump-Diffusion Proces ...

Index acceptable portfolios 23, 25–6 accumulated value 77–83 advanced measurement approach (AMA) 2 calibration 12–16 aggregate d ...

366 INDEX basic multivariate normal (BMVN) methodcontinued incorporation of hedging constraints 165–6 incorporation of sampling ...

INDEX 367 correlation breakdowns 226–40 correlation jumps and volatility behaviour 228–36 data and descriptive statistics 226–8 ...

368 INDEX diversification-based risk measure continued properties of the measure 27–8, 44–5 dollar-denominated risk 26–7 insuran ...

INDEX 369 futures contracts 26, 34, 35 Galluccio, S. 357, 358, 360 Gallus, C. 203 Gamma 358–9, 362–3 GARCH models 48 conditional ...

370 INDEX intensity-based modelscontinued default events correlations 138–9 extensions 143–50;α-stable distributions 146–50; mul ...

INDEX 371 Majnoni, G. 48 Malkiel, B.G. 108, 111 Mallows, C.L. 148 Mandal, K. 103 Manganelli, S. 48, 54, 57, 66, 67 Mann, C. 108 ...

372 INDEX multivariate normal distribution see basic multivariate normal (BMVN) method multivariate statistical surveillance 246 ...

INDEX 373 with inflation-linked products 173–82 time-varying return correlations and the efficient set of portfolios 265–77 port ...

374 INDEX behavior in the out-of-control state 255–8; sequential control procedures, behavior continued structure of Monte Carlo ...

INDEX 375 Theodossiou, P.T. 242 three-stage least-squares (3SLS) method 98 time-varying return correlations 265–77 Tistaert, J. ...