Abstract
Until now, we have studied a few products using simple models. To build the fair value, we need to fully understand the way to hedge. We shall describe the fair value from the point of view of an investment bank, that is from the sell side. In particular, the hedging portfolio immunizes the book against spot and volatility movements.
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© 2015 Adil Reghai
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Reghai, A. (2015). What is the Fair Value in the Presence of the Smile?. In: Quantitative Finance. Applied Quantitative Finance series. Palgrave Macmillan, London. https://doi.org/10.1057/9781137414502_4
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DOI: https://doi.org/10.1057/9781137414502_4
Publisher Name: Palgrave Macmillan, London
Print ISBN: 978-1-349-49028-8
Online ISBN: 978-1-137-41450-2
eBook Packages: Palgrave Economics & Finance CollectionEconomics and Finance (R0)