• Corpus ID: 251104781

Bartlett's Delta revisited: Variance-optimal hedging in the lognormal SABR and in the rough Bergomi model

@inproceedings{KellerRessel2022BartlettsDR,
  title={Bartlett's Delta revisited: Variance-optimal hedging in the lognormal SABR and in the rough Bergomi model},
  author={Martin Keller-Ressel},
  year={2022}
}

• M. Keller-Ressel
• Published 27 July 2022
• Mathematics

We derive analytic expressions for the variance-optimal hedging strategy and its mean-square hedging error in the lognormal SABR and in the rough Bergomi model. In the SABR model, we show that the variance-optimal hedging strategy coincides with the Delta adjustment of Bartlett [Wilmott magazine 4/6 (2006)]. We show both mathematically and in simulation that the efficiency of the variance-optimal strategy (in comparison to simple Delta hedging) depends strongly on the leverage parameter ρ and – in a weaker sense – also on the roughness parameter H of the model, and give a precise quantification of this dependency.