Delta-hedged gains of SSE 50 ETF options

ABSTRACT

Using Chinese option market data, we construct a delta-neutral strategy for Shanghai Stock Exchange (SSE) 50ETF options and investigate the statistical properties of the strategy gains. The empirical results show that the delta-hedged gains are significantly negative, indicating that to hedge the volatility risk, the option buyer needs to pay a volatility risk premium to the option seller.

KEYWORDS:

• SSE 50 ETF options
• delta hedge gains
• volatility risk premium
• stochastic volatility

Disclosure statement

No potential conflict of interest was reported by the author(s).

Correction Statement

This article has been corrected with minor changes. These changes do not impact the academic content of the article.

Notes

¹ The report is written in Chinese and can be accessed via the following link: http://www.sse.com.cn/aboutus/mediacenter/hotandd/c/4,990,768.pdf

Additional information

Funding

This work was supported by the National Natural Science Foundation of China [71771144] and the the National Social Science Foundation of China [19BJL122].