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| Title | Delta Hedging in the USD/JPY Options Market: Insights from Implied Stochastic Volatility 美元兌日圓選擇權市場之Delta避險：來自隱含隨機波動度的洞見 |
| Creator | 林士貴;羅秉政;林崇仁;葉宗瑋 Lin, Shih-Kuei;Vincent, Kendro;Lin, Chung-Jen;Yeh, Zong-Wei |
| Contributor | 金融系 |
| Key Words | FX options market; Heston model; Implied stochastic volatility; Minimum variance Delta hedge ratio 外匯選擇權市場; Heston模型; 隱含隨機波動度; 最小變異Delta避險比率 |
| Date | 2024-07 |
| Date Issued | 2024-12-12 |
| Summary | Purpose - The purpose of this paper is to explore the performance of the implied stochastic volatility (ISV) approach in fitting the implied volatility surface (IVS) of USD/JPY and to analyze the hedging performance under standard and minimum variance (MV) delta. Design/methodology/approach - In this study, the ISV approach proposed by Aït-Sahalia et al. (2021) is mainly used to construct the IVS and parameter estimation using the Heston model as the model base. Findings - Firstly, based on the Heston model, the ISV approach has better in-sample and out-of-sample fitting ability compared to the conventional approach. On the other hand, we demonstrate that the ISV approach is effective in improving the accuracy of the hedging, especially in terms of the MV delta, using a delta-neutral hedging strategy. Research limitations/implications - The ISV approach incorporates information about the shape characteristics of the IVS into the parameter estimation procedure, making it more effective in capturing the dynamics of the underlying asset and volatility. Practical implications/Social implications - The ISV approach integrates the advantages of no-arbitrage models and polynomial models to present volatility dynamics in a more comprehensive way. On the other hand, the methodology has significant economic implications for both academic and practical applications. Originality/value - This study is the first empirical study using the ISV approach in the FX option market. The study confirms the economic significance of incorporating shape characteristics into the parameters. 研究目的：探索隱含隨機波動度方法在USD／JPY隱含波動性曲面擬合及避險績效（標準delta與最小變異delta）。研究方法／方法：採用Aït-Sahalia et al.（2021）的隱含隨機波動度方法，以Heston模型為基底建立隱含波動度曲面和參數估計。研究結果：隱含隨機波動度方法在樣本內外擬合表現優於常規方法，且透過Delta-neutral策略顯著提升避險準確性，尤其在最小變異delta方面。研究限制／啟發：方法融入隱含波動度形狀特徵於參數估計，更準確捕捉標的資產與波動度動態。理論／實務／社會意涵：結合無套利與多項式模型優勢，全面展現波動性動態，對學術及實務應用具重要經濟意義。創見／價值：首次將隱含隨機波動度方法應用於外匯市場實證研究，證實納入形狀特徵於參數估計的重要性。 |
| Relation | 管理評論, Vol.43, No.3, pp.1-17 |
| Type | article |
| DOI | https://doi.org/10.6656/MR.202407_43(3).ENG001 |
| dc.contributor | 金融系 | |
| dc.creator (作者) | 林士貴;羅秉政;林崇仁;葉宗瑋 | |
| dc.creator (作者) | Lin, Shih-Kuei;Vincent, Kendro;Lin, Chung-Jen;Yeh, Zong-Wei | |
| dc.date (日期) | 2024-07 | |
| dc.date.accessioned | 2024-12-12 | - |
| dc.date.available | 2024-12-12 | - |
| dc.date.issued (上傳時間) | 2024-12-12 | - |
| dc.identifier.uri (URI) | https://nccur.lib.nccu.edu.tw/handle/140.119/154660 | - |
| dc.description.abstract (摘要) | Purpose - The purpose of this paper is to explore the performance of the implied stochastic volatility (ISV) approach in fitting the implied volatility surface (IVS) of USD/JPY and to analyze the hedging performance under standard and minimum variance (MV) delta. Design/methodology/approach - In this study, the ISV approach proposed by Aït-Sahalia et al. (2021) is mainly used to construct the IVS and parameter estimation using the Heston model as the model base. Findings - Firstly, based on the Heston model, the ISV approach has better in-sample and out-of-sample fitting ability compared to the conventional approach. On the other hand, we demonstrate that the ISV approach is effective in improving the accuracy of the hedging, especially in terms of the MV delta, using a delta-neutral hedging strategy. Research limitations/implications - The ISV approach incorporates information about the shape characteristics of the IVS into the parameter estimation procedure, making it more effective in capturing the dynamics of the underlying asset and volatility. Practical implications/Social implications - The ISV approach integrates the advantages of no-arbitrage models and polynomial models to present volatility dynamics in a more comprehensive way. On the other hand, the methodology has significant economic implications for both academic and practical applications. Originality/value - This study is the first empirical study using the ISV approach in the FX option market. The study confirms the economic significance of incorporating shape characteristics into the parameters. | |
| dc.description.abstract (摘要) | 研究目的：探索隱含隨機波動度方法在USD／JPY隱含波動性曲面擬合及避險績效（標準delta與最小變異delta）。研究方法／方法：採用Aït-Sahalia et al.（2021）的隱含隨機波動度方法，以Heston模型為基底建立隱含波動度曲面和參數估計。研究結果：隱含隨機波動度方法在樣本內外擬合表現優於常規方法，且透過Delta-neutral策略顯著提升避險準確性，尤其在最小變異delta方面。研究限制／啟發：方法融入隱含波動度形狀特徵於參數估計，更準確捕捉標的資產與波動度動態。理論／實務／社會意涵：結合無套利與多項式模型優勢，全面展現波動性動態，對學術及實務應用具重要經濟意義。創見／價值：首次將隱含隨機波動度方法應用於外匯市場實證研究，證實納入形狀特徵於參數估計的重要性。 | |
| dc.format.extent | 161 bytes | - |
| dc.format.mimetype | text/html | - |
| dc.relation (關聯) | 管理評論, Vol.43, No.3, pp.1-17 | |
| dc.subject (關鍵詞) | FX options market; Heston model; Implied stochastic volatility; Minimum variance Delta hedge ratio | |
| dc.subject (關鍵詞) | 外匯選擇權市場; Heston模型; 隱含隨機波動度; 最小變異Delta避險比率 | |
| dc.title (題名) | Delta Hedging in the USD/JPY Options Market: Insights from Implied Stochastic Volatility | |
| dc.title (題名) | 美元兌日圓選擇權市場之Delta避險：來自隱含隨機波動度的洞見 | |
| dc.type (資料類型) | article | |
| dc.identifier.doi (DOI) | 10.6656/MR.202407_43(3).ENG001 | |
| dc.doi.uri (DOI) | https://doi.org/10.6656/MR.202407_43(3).ENG001 |