The Volatility Smile - Chapter 3 - Static and Dynamic Replication
- exploring replication
- exact static replication for European options
- approximate static replication for exotic options
- dynamic replication and continuous delta-hedging
- what should you pay for convexity?
- implied volatility is a parameter; realized volatility is a statistic
- hedging an option means betting on volatility
Exact static replication
Approximate static hedge for a European down-and-out call
A simplified explanation of dynamic replication
What should you pay for convexity?
The distinction between implied volatility and realized volatility
Notation for implied variables
Hedging an option means betting on volatility
