Static Hedging of Barrier Options Under General Asset Dynamics PDF Download
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Author: Morten Nalholm
Publisher:
ISBN:
Category :
Languages : en
Pages :
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Book Description
Author: Morten Nalholm
Publisher:
ISBN:
Category :
Languages : en
Pages :
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Book Description
Author: Morten Nalholm
Publisher:
ISBN:
Category :
Languages : en
Pages :
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Book Description
Author: Jan H. Maruhn
Publisher: Walter de Gruyter
ISBN: 3110204681
Category : Mathematics
Languages : en
Pages : 210
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Book Description
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: Leif B. G. Andersen
Publisher:
ISBN:
Category :
Languages : en
Pages : 25
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Book Description
This paper presents a number of new theoretical results for replication of barrier options through a static portfolio of European put and call options. Our results are valid for options with completely general knock-out/knock-in sets, and allow for time- and state-dependent volatility as well as discontinuous asset dynamics. We illustrate the theory with numerical examples and discuss the practical implementation.
Author:
Publisher:
ISBN:
Category :
Languages : en
Pages : 272
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Author:
Publisher:
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Category :
Languages : da
Pages : 88
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Author: Alessandro Sbuelz
Publisher:
ISBN:
Category :
Languages : en
Pages : 66
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Book Description
This article offers a general unifying treatment of barrier options. The unifying treatment is based on a general representation of the risk-neutral density of the absorbed return process of the underlying asset: the quot;convolution density.quot; On the basis of the convolution density, the article establishes relationships between plain and barrier options as well as knock-outs and knock-ins: the quot;plain/knock parities.quot; The plain/knock parities provide new static hedging strategies for the replication of double barrier options; a double barrier option is a portfolio of single barrier options. The article then derives new representations for the analytical solution of option prices in the double barrier setting. For the first time, the analytical solution of the price of the contract with a single knock-in triggering a single knock-out is offered, and new representations of the analytical solution of the price of double knock-ins and knock-outs are also offered. The form of these analytical solutions is a series which absolutely converges at a very high rate.
Author: Rüdiger Kiesel
Publisher: World Scientific
ISBN: 9814280119
Category : Business & Economics
Languages : en
Pages : 414
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Book Description
This book combines academic research and practical expertise on alternative assets and trading strategies in a unique way. The asset classes that are discussed include : credit risk, cross-asset derivatives, energy, private equity, freight agreements, alternative real assets (ARA), and socially responsible investments (SRI). The coverage on trading and investment strategies are directed at portfolio insurance, especially constant proportion portfolio insurance (CPPI) and constant proportion debt obligation (CPDO) strategies, robust portfolio optimization, and hedging strategies for exotic options.
Author:
Publisher:
ISBN:
Category : Futures
Languages : en
Pages : 788
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Author: Emmanuel Deogratias
Publisher: LAP Lambert Academic Publishing
ISBN: 9783659362316
Category :
Languages : en
Pages : 124
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Book Description
The Black Scholes Model (1973) is used to price and hedge plain vanilla barrier options on a non dividend paying asset. Under this model, Monte Carlo Simulation, Stratified sampling, Simpson's rule, Trapezoidal rule and Antithetic variable techniques have been used to determine the value and hedging portfolio of a plain vanilla barrier option. Also stochastic dynamic programming has been developed so as to determine the price and hedging portfolio of the option. Finally the methods are compared to each other in terms of accuracy. It is found that stratified sampling technique is the best method after comparing with other methods.
