Perfect and Imperfect Option Replication

Result code in IS VaVaI
<a href="https://www.isvavai.cz/riv?ss=detail&h=RIV%2F61989100%3A27510%2F03%3A00007651" target="_blank" >RIV/61989100:27510/03:00007651 - isvavai.cz</a>
Result on the web
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DOI - Digital Object Identifier
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Result language
angličtina
Original language name
Perfect and Imperfect Option 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
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Czech description
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Publication year
2003
Confidentiality
S - Úplné a pravdivé údaje o projektu nepodléhají ochraně podle zvláštních právních předpisů

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