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Option Hedging - Perfect and Imperfect Replication

The result's identifiers

  • Result code in IS VaVaI

    <a href="https://www.isvavai.cz/riv?ss=detail&h=RIV%2F61989100%3A27510%2F03%3A00007649" target="_blank" >RIV/61989100:27510/03:00007649 - isvavai.cz</a>

  • Result on the web

  • DOI - Digital Object Identifier

Alternative languages

  • Result language

    angličtina

  • Original language name

    Option Hedging - Perfect and Imperfect Replication

  • Original language description

    The purpose of this article is to study the efficiency of chosen replication methods of contingent claims. The article deals with the most common way to replicate the pay-off of options - dynamic replication. The method of dynamic replication is based onever-changing positions in replication portfolio consisting of risky (underlying) and risk-less assets. The classical approach is based on achieving of perfect hedge (replication). However, subjects are often not able or willing to put in all the capital needed to achieve the perfect strategy. In this case come on hand the method of partial replication, or quantile hedging in other words. The weakness of the method is that it does not incorporate the size of shortfall. So we should not be interested inthe size of profit/loss. We take care just if it happens or not. In order to compare the effect of discrete trading on efficiency of dynamic partial replication the Monte Carlo simulation is used.

  • Czech name

  • Czech description

Classification

  • Type

    C - Chapter in a specialist book

  • CEP classification

    AH - Economics

  • OECD FORD branch

Result continuities

  • Project

  • Continuities

    Z - Vyzkumny zamer (s odkazem do CEZ)

Others

  • Publication year

    2003

  • Confidentiality

    S - Úplné a pravdivé údaje o projektu nepodléhají ochraně podle zvláštních právních předpisů

Data specific for result type

  • Book/collection name

    Departamento de Estadística, Econometría, Investigación Operativa y Organización de Empresas: Documentos de Trabajo

  • ISBN

    84-95723-04-2

  • Number of pages of the result

    8

  • Pages from-to

    1-8

  • Number of pages of the book

  • Publisher name

    Universidad de Córdoba

  • Place of publication

    Córdoba

  • UT code for WoS chapter