*4.1. Hedge Test Experiments*

In this section, we discuss the results of the hedge test which was explained above. This test experiment indicates which approach is more accurate when evaluating future option prices, a measure which assumes *v*¯ and *γ* to be constant or a measure which assumes *v*¯ and *γ* to change over time. We thus consider the classical approach, with constant *v*¯ and *γ*, and two approaches that assume *v*¯ and *γ* to change over time. The different hedging strategies are tested in a simulated market as well as in an empirical market.

The empirical hedge test is based on daily implied volatility surfaces of the S&P-500 European put and call options from January 2006 to February 2014.
