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Author : 莊子寅
Publisher :
ISBN 13 :
Total Pages : 172 pages
Book Rating : 4.:/5 (367 download)
Download or read book Optimized Static Hedging Strategy and Hedging Error Analysis for Barrier Options written by 莊子寅 and published by . This book was released on 2008 with total page 172 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Author : Jan H. Maruhn
Publisher : Walter de Gruyter
ISBN 13 : 3110208512
Total Pages : 210 pages
Book Rating : 4.1/5 (12 download)
Download or read book Robust Static Super-Replication of Barrier Options written by Jan H. Maruhn and published by Walter de Gruyter. This book was released on 2009-07-14 with total page 210 pages. Available in PDF, EPUB and Kindle. Book excerpt: Static hedge portfolios for barrier options are very sensitive with respect to changes of the volatility surface. To prevent potentially significant hedging losses this book develops a static super-replication strategy with market-typical robustness against volatility, skew and liquidity risk as well as model errors. Empirical results and various numerical examples confirm that the static superhedge successfully eliminates the risk of a changing volatility surface. Combined with associated sub-replication strategies this leads to robust price bounds for barrier options which are also relevant in the context of dynamic hedging. The mathematical techniques used to prove appropriate existence, duality and convergence results range from financial mathematics, stochastic and semi-infinite optimization, convex analysis and partial differential equations to semidefinite programming.
Author : Kacper Jurga
Publisher :
ISBN 13 :
Total Pages : 196 pages
Book Rating : 4.:/5 (84 download)
Download or read book Pricing and static hedging of foreign exchange barrier options written by Kacper Jurga and published by . This book was released on 2012 with total page 196 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Author : Bernd Engelmann
Publisher :
ISBN 13 :
Total Pages : pages
Book Rating : 4.:/5 (129 download)
Download or read book Better than its Reputation written by Bernd Engelmann and published by . This book was released on 2011 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: In this paper we empirically analyze the pricing and dynamic hedging of barrier options in the local volatility model. It is known that local volatility is not a good description of economic reality. In practice, several ad-hoc modifications of the model exist to make it applicable. One of these modifications is defining spot sensitivities in different ways. Delta can be computed assuming that the local volatility surface is fixed (sticky-local-volatility or model-consistent delta), or assuming that the implied volatility surface is fixed (sticky-strike delta), or assuming that the implied volatility surface floats with the underlying spot value (sticky-moneyness delta). Using data of the EUREX for options on the DAX, we compare these three delta concepts in an empirical hedging analysis for barrier options with a maturity of one and two years. We find that delta hedging alone does not lead to satisfactory results with the sticky-strike assumption performing best. By using plain vanilla options as additional hedging instruments and by defining hedges against movements of the implied volatility surface in a meaningful way, the hedging performance can be improved considerably. We analyze two different dynamic hedging strategies involving plain vanilla options and demonstrate that the resulting hedging errors are distributed around zero with a small variance for both strategies. Several non-parametric tests on the empirical time series of hedging errors confirm that the sensitivities computed under the sticky-strike assumption yield the best hedging results, while model-consistent hedges have the largest dispersion. It turns out that the hedging strategy is much more important for getting a small dispersion of hedging errors than the specific way of computing sensitivities.
Author : Nassim Nicholas Taleb
Publisher : John Wiley & Sons
ISBN 13 : 9780471152804
Total Pages : 536 pages
Book Rating : 4.1/5 (528 download)
Download or read book Dynamic Hedging written by Nassim Nicholas Taleb and published by John Wiley & Sons. This book was released on 1997-01-14 with total page 536 pages. Available in PDF, EPUB and Kindle. Book excerpt: Destined to become a market classic, Dynamic Hedging is the only practical reference in exotic options hedgingand arbitrage for professional traders and money managers Watch the professionals. From central banks to brokerages to multinationals, institutional investors are flocking to a new generation of exotic and complex options contracts and derivatives. But the promise of ever larger profits also creates the potential for catastrophic trading losses. Now more than ever, the key to trading derivatives lies in implementing preventive risk management techniques that plan for and avoid these appalling downturns. Unlike other books that offer risk management for corporate treasurers, Dynamic Hedging targets the real-world needs of professional traders and money managers. Written by a leading options trader and derivatives risk advisor to global banks and exchanges, this book provides a practical, real-world methodology for monitoring and managing all the risks associated with portfolio management. Nassim Nicholas Taleb is the founder of Empirica Capital LLC, a hedge fund operator, and a fellow at the Courant Institute of Mathematical Sciences of New York University. He has held a variety of senior derivative trading positions in New York and London and worked as an independent floor trader in Chicago. Dr. Taleb was inducted in February 2001 in the Derivatives Strategy Hall of Fame. He received an MBA from the Wharton School and a Ph.D. from University Paris-Dauphine.
Author : Katharyn Arabella Boyle
Publisher :
ISBN 13 :
Total Pages : 330 pages
Book Rating : 4.E/5 ( download)
Download or read book Risk Minimization Hedging Methods Using Options written by Katharyn Arabella Boyle and published by . This book was released on 2005 with total page 330 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Author :
Publisher :
ISBN 13 :
Total Pages : 272 pages
Book Rating : 4.E/5 ( download)
Download or read book Static Vs Dynamic Hedging written by and published by . This book was released on 1997 with total page 272 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Author : Morten Nalholm
Publisher :
ISBN 13 :
Total Pages : pages
Book Rating : 4.:/5 (122 download)
Download or read book Static Hedging of Barrier Options Under General Asset Dynamics written by Morten Nalholm and published by . This book was released on 2005 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:
Author : Morten Nalholm
Publisher :
ISBN 13 :
Total Pages : pages
Book Rating : 4.:/5 (873 download)
Download or read book Working Papers written by Morten Nalholm and published by . This book was released on 2005 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:
Author : Tim Leung
Publisher :
ISBN 13 :
Total Pages : 33 pages
Book Rating : 4.:/5 (13 download)
Download or read book Optimal Static Quadratic Hedging written by Tim Leung and published by . This book was released on 2019 with total page 33 pages. Available in PDF, EPUB and Kindle. Book excerpt: We propose a flexible framework for hedging a contingent claim by holding static positions in vanilla European calls, puts, bonds, and forwards. A model-free expression is derived for the optimal static hedging strategy that minimizes the expected squared hedging error subject to a cost constraint. The optimal hedge involves computing a number of expectations that reflect the dependence among the contingent claim and the hedging assets. We provide a general method for approximating these expectations analytically in a general Markov diffusion market. To illustrate the versatility of our approach, we present several numerical examples, including hedging path-dependent options and options written on a correlated asset.
Author : Aleš Černý
Publisher :
ISBN 13 :
Total Pages : 41 pages
Book Rating : 4.:/5 (129 download)
Download or read book The Risk of Optimal, Continuously Rebalanced Hedging Strategies and Its Efficient Evaluation Via Fourier Transform written by Aleš Černý and published by . This book was released on 2020 with total page 41 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper derives a closed-form formula for the hedging error of optimal and continuously rebalanced hedging strategies in a model with leptokurtic IID returns and, in contrast to the standard Black-Scholes result, shows that continuous hedging is far from riskless even in the absence of transaction costs. Our result can be seen as an extension of the Capital Asset Pricing Model and the Arbitrage Pricing Theory, allowing for intertemporal risk diversification.lt;brgt;lt;brgt;The paper provides an efficient implementation of the optimal hedging strategy and of the hedging error formula via fast Fourier transform and demonstrates their speed and accuracy. We compute the size of hedging errors for individual options based on the historical distribution of returns on FT100 equity index as a function of moneyness and time to maturity. The resulting option price bounds are found to be non-trivial, and largely insensitive to model parameters, while the optimal hedging strategy remains virtually identical to the standard Black-Scholes delta hedge. Thus, with leptokurtic returns Black-Scholes price is the right value to hedge towards, but not the right value to price at.
Author : Maria-Cristina Patron
Publisher :
ISBN 13 :
Total Pages : 346 pages
Book Rating : 4.E/5 ( download)
Download or read book Risk Measures and Optimal Strategies for Discrete Hedging written by Maria-Cristina Patron and published by . This book was released on 2003 with total page 346 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Author : Svetlana Boyarchenko
Publisher :
ISBN 13 :
Total Pages : 65 pages
Book Rating : 4.:/5 (13 download)
Download or read book Static and Semi-Static Hedging as Contrarian Or Conformist Bets written by Svetlana Boyarchenko and published by . This book was released on 2019 with total page 65 pages. Available in PDF, EPUB and Kindle. Book excerpt: In this paper, we argue that, once the costs of maintaining the hedging portfolio are properly taken into account, semi-static portfolios should more properly be thought of as separate classes of derivatives, with non-trivial, model-dependent payoff structures. We derive new integral representations for payoffs of exotic European options in terms of payoffs of vanillas, different from Carr-Madan representation, and suggest approximations of the idealized static hedging/replicating portfolio using vanillas available in the market. We study the dependence of the hedging error on a model used for pricing and show that the variance of the hedging errors of static hedging portfolios can be sizeably larger than the errors of variance-minimizing portfolios. We explain why the exact semi-static hedging of barrier options is impossible for processes with jumps, and derive general formulas for variance-minimizing semi-static portfolio. We show that hedging using vanillas only leads to larger errors than hedging using vanillas and first touch digitals. In all cases, efficient calculations of the weights of the hedging portfolios are in the dual space using new efficient numerical methods for calculation of the Wiener-Hopf factors and Laplace-Fourier inversion.
Author :
Publisher :
ISBN 13 :
Total Pages : 140 pages
Book Rating : 4.E/5 ( download)
Download or read book Volatility Hedging written by and published by . This book was released on 1998 with total page 140 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Author : Artur Sepp
Publisher :
ISBN 13 :
Total Pages : 37 pages
Book Rating : 4.:/5 (13 download)
Download or read book When You Hedge Discretely written by Artur Sepp and published by . This book was released on 2015 with total page 37 pages. Available in PDF, EPUB and Kindle. Book excerpt: We consider the delta-hedging strategy for a vanilla option under the discrete hedging and transaction costs, assuming that an option is delta-hedged using the Black-Scholes-Merton model with the log-normal volatility implied by the market price of the option. We analyze the expected profit-and-loss (P&L) of the delta-hedging strategy assuming the four possible dynamics of asset returns under the statistical measure: the log-normal diffusion, the jump-diffusion, the stochastic volatility and the stochastic volatility with jumps. For all of the four models, we derive analytic formulas for the expected P&L, expected transaction costs, and P&L volatility assuming hedging at fixed times. Using these formulas, we formulate the problem of finding the optimal hedging frequency to maximize the Sharpe ratio of the delta-hedging strategy. Also, we show that the Sharpe ratio of the delta-hedging strategy can be improved by incorporating the price and delta bands for the rebalancing of the delta-hedge and provide analytical approximations for computing the optimal bands in our optimization approach. As illustrations, we show that our method provides a very good approximation to the actual Sharpe ratio obtained by Monte Carlo simulations under the time-based re-hedging. In contrary to Monte Carlo simulations, our analytic approach provide a fast and an accurate way to estimate the risk-reward characteristic of the delta-hedging strategy for real time computations.
Author : Jean-Francois Picron
Publisher :
ISBN 13 :
Total Pages : pages
Book Rating : 4.:/5 (129 download)
Download or read book Static Hedging of Timing Risk written by Jean-Francois Picron and published by . This book was released on 1999 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: Many exotic options involve a payoff that occurs at the first time the stock price crosses a constant barrier. Although the amount to be paid is known, the time at which it is paid is not. This article shows how a static position in European options can be used to hedge against this timing risk. The simulation results show that this approach outperforms dynamic hedging with the underlying. The authors show how these results can be used to price any barrier option.
Author : Chung San-Lin
Publisher :
ISBN 13 :
Total Pages : pages
Book Rating : 4.:/5 (13 download)
Download or read book Static Hedging and Pricing American Knock-Out Options written by Chung San-Lin and published by . This book was released on 2017 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper extends the static hedge portfolio (SHP) approach of Derman, Ergener, and Kani (1995) and Carr, Ellis, and Gupta (1998) to price and/or hedge American knock-out options. We construct a SHP to match the complicated boundary conditions of American barrier options. Detailed analyses of the profit and loss distributions suggest that the hedging effectiveness of a bi-monthly SHP is far less risky than that of a delta-hedging portfolio with daily rebalance. Moreover, numerical results indicate that the efficiency of the proposed method is comparable to Boyle and Tian (1999) for pricing American knock-out options under the constant elasticity of variance (CEV) model of Cox (1975). In particular, the recalculation of the option prices and hedge ratios under the proposed method is much easier and quicker than the tree methods.
