  This paper investigates the optimal choices of financial derivatives to
complete a financial market in the framework of stochastic volatility (SV)
models. We introduce an efficient and accurate simulation-based method,
applicable to generalized diffusion models, to approximate the optimal
derivatives-based portfolio strategy. We build upon the double optimization
approach (i.e. expected utility maximization and risk exposure minimization)
proposed in Escobar-Anel et al. (2022); demonstrating that strangle options are
the best choices for market completion within equity options. Furthermore, we
explore the benefit of using volatility index derivatives and conclude that
they could be more convenient substitutes when only long-term maturity equity
options are available.
