Levendis, AlexisMare, Eben2025-04-092025-04-092024-07Levendis, A. & Maré E. 2024, ‘Static hedging of vanilla and exotic options in a South African context’, ORiON, vol. 40, no. 1, pp. 25-44, doi : 10.5784/40-1-768.0529-191X (print)2224-0004 (online)10.5784/40-1-768http://hdl.handle.net/2263/101952In this paper, we test the performance of a static hedging strategy for a long-dated European call option and European spread call option in South Africa. The stochastic volatility double jump (SVJJ) model is calibrated to historical FTSE/JSE Top40 returns to generate real-world FTSE/JSE Top40 prices at future dates. The SVJJ model is also calibrated to the FTSE/JSE (Top40) implied volatility surface in order to value the options under the risk-neutral measure. Two static hedging programs are then implemented to test their effectiveness when replicating a long-dated European call option and European spread call option. Our results indicate that static hedging is a simple, yet effective, solution when hedging non-exchange-traded options with vanilla exchange-traded options.en© 2024 Operations Research Society of South Africa (ORSSA). Open Access. This license lets others distribute, remix, tweak, and build upon your work, even commercially, as long as they credit you for the original creation.Real-world measureRisk-neutral measureCalibrationReplicating portfolioStatic hedgingSDG-08: Decent work and economic growthSDG-09: Industry, innovation and infrastructureStochastic volatility double jump (SVJJ) modelArticle