Implementing Static Hedges for Reverse Barrier Options: Under the Consideration of Market Frictions - Couverture souple

Stolte, Johannes

 
9783844311143: Implementing Static Hedges for Reverse Barrier Options: Under the Consideration of Market Frictions
Couverture souple
ISBN 10 : 3844311149 ISBN 13 : 9783844311143
Editeur : LAP LAMBERT Academic Publishing, 2011

Synopsis

Barrier options are the most actively traded type of exotic equity derivative today. Especially reverse barrier options, like the up-and-out call considered here, are extremely difficult to hedge however. A number of interesting and sophisticated approaches of static hedging have therefore been proposed in the literature. To implement any of these static hedges under the consideration of observed market frictions many adjustments need to be addressed. This paper discusses the necessary adjustments for a large number of static hedges. As an example, DAX index options that are traded on the EUREX will be considered. In addition, hedge performance is analyzed with regard to a discounted hedge error. It turns out that only a few of the proposed static hedges perform satisfactory for an up-and-out call option with a barrier at 120%. It further seems unrealistic to hedge many different volatility levels or jump components in practice, as is proposed by some recent studies.

Les informations fournies dans la section « Synopsis » peuvent faire référence à une autre édition de ce titre.

Présentation de l'éditeur

Barrier options are the most actively traded type of exotic equity derivative today. Especially reverse barrier options, like the up-and-out call considered here, are extremely difficult to hedge however. A number of interesting and sophisticated approaches of static hedging have therefore been proposed in the literature. To implement any of these static hedges under the consideration of observed market frictions many adjustments need to be addressed. This paper discusses the necessary adjustments for a large number of static hedges. As an example, DAX index options that are traded on the EUREX will be considered. In addition, hedge performance is analyzed with regard to a discounted hedge error. It turns out that only a few of the proposed static hedges perform satisfactory for an up-and-out call option with a barrier at 120%. It further seems unrealistic to hedge many different volatility levels or jump components in practice, as is proposed by some recent studies.

Biographie de l'auteur

Johannes Stolte, MSc, CQF: Studied Econometrics and Operations Research at Maastricht University to Masters Level. He worked on various quant desks, which helped to obtain a good working knowledge of exotic options and the various pricing techniques. Currently a PhD Candidate in Mathematical Finance at Imperial College London.

Les informations fournies dans la section « A propos du livre » peuvent faire référence à une autre édition de ce titre.

Éditeur
LAP LAMBERT Academic Publishing
Date d'édition
2011
Langue
anglais
ISBN 10 
3844311149
ISBN 13 
9783844311143
Reliure
Broché
Nombre de pages
68
Coordonnées du fabricant
non disponible
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