Performance of Delta-Hedging on Black-Scholes Model and Heston Model

Weiyi Qian

2022

Abstract

This paper mainly studies the Black-Scholes model, Heston model and their delta hedge, using the same data about stock and option price of Ford Motor, which is useful for investors and company managers to build their portfolios. In this study, unknow volatility is firstly assumed for the sake of simplicity. Then through calculating, the theoretical volatility is estimated for establishing the model. Finally, after two models having been established, the delta-hedging performances on them are compared in terms of the total gain or loss. Relatively, the profit Heston model brings to the company is higher than the Black-Scholes model and the error sum of squares of Heston model is lower than the Black-Scholes model. The results confirm that choosing Heston model is more beneficial than BS model to investors for processing the data of Ford Motor and gets a more accurate prediction.

Paper Citation

in Harvard Style

Qian W. (2022). Performance of Delta-Hedging on Black-Scholes Model and Heston Model. In Proceedings of the 4th International Conference on Economic Management and Model Engineering - Volume 1: ICEMME; ISBN 978-989-758-636-1, SciTePress, pages 372-380. DOI: 10.5220/0012033300003620

in Bibtex Style

@conference{icemme22,
author={Weiyi Qian},
title={Performance of Delta-Hedging on Black-Scholes Model and Heston Model},
booktitle={Proceedings of the 4th International Conference on Economic Management and Model Engineering - Volume 1: ICEMME},
year={2022},
pages={372-380},
publisher={SciTePress},
organization={INSTICC},
doi={10.5220/0012033300003620},
isbn={978-989-758-636-1},
}

in EndNote Style

TY - CONF

JO - Proceedings of the 4th International Conference on Economic Management and Model Engineering - Volume 1: ICEMME
TI - Performance of Delta-Hedging on Black-Scholes Model and Heston Model
SN - 978-989-758-636-1
AU - Qian W.
PY - 2022
SP - 372
EP - 380
DO - 10.5220/0012033300003620
PB - SciTePress