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QUESTION
Explain how a dynamic deltahedging strategy works, and why the net profit/loss is close to but not exactly equal to zero. (Limit 150 words) (1 Mark)...
1. Explain how a dynamic delta‐hedging strategy works, and why the net profit/loss is close to but not exactly equal to zero. (Limit 150 words) (1 Mark)
2. Explain the difference, in terms of volatility forecasting, between using a GARCH (1,1) model and using the sample standard deviation. (Limit 150 words) (1 Mark)
3. How does using a copula help with modelling the correlation between defaults?(Limit 150 words) (1 Mark)
