The goal of this thesis is to test hedging strategies for complex derivatives in different volatility models. One class of volatility models are flat volatility models with a constant volatility, the second class of volatility models are stochastic local volatility models. Therefore, the theoretical background for stochastic local volatility models will be derived with a focus on the implied dynamics of the volatility surface. After theoretical consideration of the risks involved in two popular structured derivatives, delta and vega hedging strategies, as well as a probability weighted semi-static hedge are tested in a simulation using flat volatility models as well as stochastic local volatility models. The results are interpreted and the differences between hedges in flat volatility models and hedges in stochastic local volatility models are investigated.     «

The goal of this thesis is to test hedging strategies for complex derivatives in different volatility models. One class of volatility models are flat volatility models with a constant volatility, the second class of volatility models are stochastic local volatility models. Therefore, the theoretical background for stochastic local volatility models will be derived with a focus on the implied dynamics of the volatility surface. After theoretical consideration of the risks involved in two popular...     »