Table A2 Hedging errors of China 50 ETF...

Table A2

Hedging errors of China 50 ETF options from January 4, 2021 to December 22, 2021

Model	Short (10–90 days)			Long (>90 days)
Model	MHE	MAHE	N	MHE	MAHE	N
A. Deep OTM put (Moneyness<0.85)
SVI	1.0936	1.1904	182	1.5247	1.5279	145
Spline	1.0778	1.1333		1.4713	1.4772
B. OTM put (0.85<Moneyness<1)
SVI	0.2246	0.9961	1974	0.5439	0.5627	775
Spline	0.2015	0.9698		0.5314	0.5513
C. OTM call (1<Moneyness<1.15)
SVI	0.0545	0.6291	1951	0.0274	0.1409	765
Spline	0.0488	0.5991		0.0690	0.1422
D. Deep OTM call (Moneyness>1.15)
SVI	0.5530	0.7301	605	0.1875	0.2535	361
Spline	0.5938	0.7794		0.1799	0.2485

Model	Short (10–90 days)			Long (>90 days)
Model	MHE	MAHE	N	MHE	MAHE	N
A. Deep OTM put (Moneyness<0.85)
SVI	1.0936	1.1904	182	1.5247	1.5279	145
Spline	1.0778	1.1333		1.4713	1.4772
B. OTM put (0.85<Moneyness<1)
SVI	0.2246	0.9961	1974	0.5439	0.5627	775
Spline	0.2015	0.9698		0.5314	0.5513
C. OTM call (1<Moneyness<1.15)
SVI	0.0545	0.6291	1951	0.0274	0.1409	765
Spline	0.0488	0.5991		0.0690	0.1422
D. Deep OTM call (Moneyness>1.15)
SVI	0.5530	0.7301	605	0.1875	0.2535	361
Spline	0.5938	0.7794		0.1799	0.2485

Note(s): SVI: the SSVI model in Gatheral and Jacquier (2014). Spline: 5th-order spline interpolation with one knot at moneyness one. Hedging is rebalanced with intervals of seven calendar days. The delta is calculated using the BSM formulas with the model volatility. Short/Long: maturity in calendar days. MHE: mean hedging error defined in Liu et al. (2022). MAHE: mean absolute hedging error defined in Liu et al. (2022). N: the number of options with valid hedging series in each category

Source(s): Authors’ own work

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