"Briefly speaking, our conclusion is that stochastic volatility does not make a huge difference as far as the pricing is concerned if you get the average volatility right. It makes a big difference as far as hedging is concerned"
- John C. Hull
About this Quote
John C. Hull is suggesting that when it pertains to pricing, stochastic volatility does not make a substantial distinction if the average volatility is correctly approximated. Nevertheless, when it pertains to hedging, stochastic volatility makes a huge difference. This suggests that while prices may not be considerably affected by stochastic volatility, hedging methods should take into account the capacity for volatility to alter in time. This is because hedging techniques must be able to get used to altering market conditions in order to be successful. Therefore, it is necessary to think about the capacity for stochastic volatility when developing hedging techniques.
This quote is written / told by John C. Hull somewhere between October 31, 1939 and today. He was a famous Professor from USA.
The author also have 18 other quotes.
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