A General Multidimensional Monte Carlo Approach for Dynamic Hedging under Stochastic Volatility

Table 1

Monte Carlo hedging strategy of a BLAC down-and-out option for a 5-dimensional Black-Scholes model.

	Hedging	St. error	LL	UL	True value	Difference	% error
3	0.00376	2.37 × 10^−5	0.00371	0.00380	0.00338	0.00038	11.15%
4	0.00365	4.80 × 10^−5	0.00356	0.00374	0.00338	0.00027	8.03%
5	0.00366	9.31 × 10^−5	0.00348	0.00384	0.00338	0.00028	8.35%
6	0.00342	1.82 × 10^−4	0.00306	0.00378	0.00338	0.00004	1.29%