Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/275180 
Year of Publication: 
2023
Citation: 
[Journal:] Journal of Risk and Financial Management [ISSN:] 1911-8074 [Volume:] 16 [Issue:] 2 [Article No.:] 112 [Year:] 2023 [Pages:] 1-18
Publisher: 
MDPI, Basel
Abstract: 
Although the finance literature has devoted a lot of research into the development of advanced models for improving the pricing and hedging performance, there has been much less emphasis on approaches to measure dynamic hedging effectiveness. This article discusses a statistical framework based on regression analysis to measure the effectiveness of dynamic hedges for long-term investment guarantees. The importance of taking model risk into account is emphasized. The difficulties in reducing hedging risk to an appropriately low level lead us to propose a new perspective on hedging, and recognize it as a tool to modify the risk-reward relationship of the unhedged position.
Subjects: 
dynamic hedging
hedging effectiveness
investment guarantee
model risk
variable annuity
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by Logo
Document Type: 
Article

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