Author: Nassim Nicholas Taleb
Publisher: John Wiley & Sons
ISBN: 9780471152804
Category : Business & Economics
Languages : en
Pages : 536
Book Description
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.
Dynamic Hedging
Author: Nassim Nicholas Taleb
Publisher: John Wiley & Sons
ISBN: 9780471152804
Category : Business & Economics
Languages : en
Pages : 536
Book Description
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.
Publisher: John Wiley & Sons
ISBN: 9780471152804
Category : Business & Economics
Languages : en
Pages : 536
Book Description
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.
Static Vs Dynamic Hedging
Author:
Publisher:
ISBN:
Category :
Languages : en
Pages : 272
Book Description
Publisher:
ISBN:
Category :
Languages : en
Pages : 272
Book Description
Static Hedging of Standard Options
Author: Peter Carr
Publisher:
ISBN:
Category :
Languages : en
Pages : 61
Book Description
We consider the hedging of options when the price of the underlying asset is always exposed to the possibility of jumps of random size. Working in a single factor Markovian setting, we derive a new spanning relation between a given option and a continuum of shorter-term options written on the same asset. In this portfolio of shorter-term options, the portfolio weights do not vary with the underlying asset price or calendar time. We then implement this static relation using a finite set of shorter-term options and use Monte Carlo simulation to determine the hedging error thereby introduced. We compare this hedging error to that of a delta hedging strategy based on daily rebalancing in the underlying futures. The simulation results indicate that the two types of hedging strategies exhibit comparable performance in the classic Black-Scholes environment, but that our static hedge strongly outperforms delta hedging when the underlying asset price is governed by Merton (1976)'s jump-diffusion model. The conclusions are unchanged when we switch to ad hoc static and dynamic hedging practices necessitated by a lack of knowledge of the driving process. Further simulations indicate that the inferior performance of the delta hedge in the presence of jumps cannot be improved upon by increasing the rebalancing frequency. In contrast, the superior performance of the static hedging strategy can be further enhanced by using more strikes or by optimizing on the common maturity in the hedge portfolio.We also compare the hedging effectiveness of the two types of strategies using more than six years of data on Samp;P 500 index options. We find that in all cases considered, a static hedge using just five call options outperforms daily delta hedging with the underlying futures. The consistency of this result with our jump model simulations lends empirical support for the existence of jumps of random size in the movement of the Samp;P 500 index. We also find that the performance of our static hedge deteriorates moderately as we increase the gap between the maturity of the target call option and the common maturity of the call options in the hedge portfolio. We interpret this result as evidence of additional random factors such as stochastic volatility.
Publisher:
ISBN:
Category :
Languages : en
Pages : 61
Book Description
We consider the hedging of options when the price of the underlying asset is always exposed to the possibility of jumps of random size. Working in a single factor Markovian setting, we derive a new spanning relation between a given option and a continuum of shorter-term options written on the same asset. In this portfolio of shorter-term options, the portfolio weights do not vary with the underlying asset price or calendar time. We then implement this static relation using a finite set of shorter-term options and use Monte Carlo simulation to determine the hedging error thereby introduced. We compare this hedging error to that of a delta hedging strategy based on daily rebalancing in the underlying futures. The simulation results indicate that the two types of hedging strategies exhibit comparable performance in the classic Black-Scholes environment, but that our static hedge strongly outperforms delta hedging when the underlying asset price is governed by Merton (1976)'s jump-diffusion model. The conclusions are unchanged when we switch to ad hoc static and dynamic hedging practices necessitated by a lack of knowledge of the driving process. Further simulations indicate that the inferior performance of the delta hedge in the presence of jumps cannot be improved upon by increasing the rebalancing frequency. In contrast, the superior performance of the static hedging strategy can be further enhanced by using more strikes or by optimizing on the common maturity in the hedge portfolio.We also compare the hedging effectiveness of the two types of strategies using more than six years of data on Samp;P 500 index options. We find that in all cases considered, a static hedge using just five call options outperforms daily delta hedging with the underlying futures. The consistency of this result with our jump model simulations lends empirical support for the existence of jumps of random size in the movement of the Samp;P 500 index. We also find that the performance of our static hedge deteriorates moderately as we increase the gap between the maturity of the target call option and the common maturity of the call options in the hedge portfolio. We interpret this result as evidence of additional random factors such as stochastic volatility.
Comparison of Dynamic and Static Hedging Strategies
Author: Fatme Abdul Karim
Publisher:
ISBN:
Category :
Languages : en
Pages :
Book Description
Publisher:
ISBN:
Category :
Languages : en
Pages :
Book Description
Trading and Pricing Financial Derivatives
Author: Patrick Boyle
Publisher: Walter de Gruyter GmbH & Co KG
ISBN: 1547401214
Category : Business & Economics
Languages : en
Pages : 273
Book Description
Trading and Pricing Financial Derivatives is an introduction to the world of futures, options, and swaps. Investors who are interested in deepening their knowledge of derivatives of all kinds will find this book to be an invaluable resource. The book is also useful in a very applied course on derivative trading. The authors delve into the history of options pricing; simple strategies of options trading; binomial tree valuation; Black-Scholes option valuation; option sensitivities; risk management and interest rate swaps in this immensely informative yet easy to comprehend work. Using their vast working experience in the financial markets at international investment banks and hedge funds since the late 1990s and teaching derivatives and investment courses at the Master's level, Patrick Boyle and Jesse McDougall put forth their knowledge and expertise in clearly explained concepts. This book does not presuppose advanced mathematical knowledge, though it is presented for completeness for those that may benefit from it, and is designed for a general audience, suitable for beginners through to those with intermediate knowledge of the subject.
Publisher: Walter de Gruyter GmbH & Co KG
ISBN: 1547401214
Category : Business & Economics
Languages : en
Pages : 273
Book Description
Trading and Pricing Financial Derivatives is an introduction to the world of futures, options, and swaps. Investors who are interested in deepening their knowledge of derivatives of all kinds will find this book to be an invaluable resource. The book is also useful in a very applied course on derivative trading. The authors delve into the history of options pricing; simple strategies of options trading; binomial tree valuation; Black-Scholes option valuation; option sensitivities; risk management and interest rate swaps in this immensely informative yet easy to comprehend work. Using their vast working experience in the financial markets at international investment banks and hedge funds since the late 1990s and teaching derivatives and investment courses at the Master's level, Patrick Boyle and Jesse McDougall put forth their knowledge and expertise in clearly explained concepts. This book does not presuppose advanced mathematical knowledge, though it is presented for completeness for those that may benefit from it, and is designed for a general audience, suitable for beginners through to those with intermediate knowledge of the subject.
Alternative Investments and Strategies
Author: Rdiger Kiesel
Publisher: World Scientific
ISBN: 9814280100
Category : Business & Economics
Languages : en
Pages : 414
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.
Publisher: World Scientific
ISBN: 9814280100
Category : Business & Economics
Languages : en
Pages : 414
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.
Sequential Static-Dynamic Hedging for Long-Term Derivatives
Author: Tim Leung
Publisher:
ISBN:
Category :
Languages : en
Pages : 8
Book Description
This paper presents a new methodology for hedging long-term financial derivatives written on an illiquid asset. The proposed hedging strategy combines dynamic trading of a correlated liquid asset (e.g. the market index) and static positions in market-traded options such as European puts and calls. Moreover, since most market-traded options are relatively short-term, it is necessary to conduct the static hedge sequentially over time till the long-term derivative expires. This sequential static-dynamic hedging strategy leads to the study of a stochastic control problem and the associated Hamilton-Jacobi-Bellman PDEs and variational inequalities. A series of transformations allow us to simplify the problem and compute the optimal hedging strategy.
Publisher:
ISBN:
Category :
Languages : en
Pages : 8
Book Description
This paper presents a new methodology for hedging long-term financial derivatives written on an illiquid asset. The proposed hedging strategy combines dynamic trading of a correlated liquid asset (e.g. the market index) and static positions in market-traded options such as European puts and calls. Moreover, since most market-traded options are relatively short-term, it is necessary to conduct the static hedge sequentially over time till the long-term derivative expires. This sequential static-dynamic hedging strategy leads to the study of a stochastic control problem and the associated Hamilton-Jacobi-Bellman PDEs and variational inequalities. A series of transformations allow us to simplify the problem and compute the optimal hedging strategy.
A Simulation Based Study Into the Hedging of Exotic Options Via Both Static and Dynamic Hedging Strategies
Author: Roger Clarke
Publisher:
ISBN:
Category :
Languages : en
Pages :
Book Description
Publisher:
ISBN:
Category :
Languages : en
Pages :
Book Description
Static and Dynamic Hedging of Barrier Options
Author:
Publisher:
ISBN:
Category :
Languages : da
Pages : 88
Book Description
Publisher:
ISBN:
Category :
Languages : da
Pages : 88
Book Description
Dynamic hedging in incomplete markets : a simple solution
Author: Suleyman Başak
Publisher:
ISBN:
Category : Financial futures
Languages : en
Pages : 47
Book Description
Publisher:
ISBN:
Category : Financial futures
Languages : en
Pages : 47
Book Description