Option Hedging Based On The Monte-Carlo Simulation

Kód výsledku v IS VaVaI

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Výsledek na webu

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DOI - Digital Object Identifier

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Jazyk výsledku

čeština

Název v původním jazyce

Option Hedging Based On The Monte-Carlo Simulation

Popis výsledku v původním jazyce

According to the classical Black-Scholes-Merton partial differential equation it is possible to mimic options pay-off by continuously rebalanced portfolio that consists of risky asset (underlying asset of the option) and risk-less asset (default-free zero-coupon bond). To obtain the right hedge ratio it is usually used first derivation of the option pricing formula according to the underlying asset price. Unfortunately, in the case of more complex options it is almost impossible to obtain an analytic pricing formula. These options can be evaluated by simulation methods (Monte-Carlo). Monte-Carlo simulation provides a simple procedure to price assets numerically, however it does not immediately provide hedge ratio. The task of the paper is to describe some alternative methods to express hedge ratio based on the Monte-Carlo simulation. To compare hedging effect of Monte-Carlo method and analytical method an illustrative example of plain vanilla call option hedge is provide. The standard

Název v anglickém jazyce

Option Hedging Based On The Monte-Carlo Simulation

Popis výsledku anglicky

According to the classical Black-Scholes-Merton partial differential equation it is possible to mimic options pay-off by continuously rebalanced portfolio that consists of risky asset (underlying asset of the option) and risk-less asset (default-free zero-coupon bond). To obtain the right hedge ratio it is usually used first derivation of the option pricing formula according to the underlying asset price. Unfortunately, in the case of more complex options it is almost impossible to obtain an analytic pricing formula. These options can be evaluated by simulation methods (Monte-Carlo). Monte-Carlo simulation provides a simple procedure to price assets numerically, however it does not immediately provide hedge ratio. The task of the paper is to describe some alternative methods to express hedge ratio based on the Monte-Carlo simulation. To compare hedging effect of Monte-Carlo method and analytical method an illustrative example of plain vanilla call option hedge is provide. The standard

Druh

D - Stať ve sborníku

CEP obor

AH - Ekonomie

OECD FORD obor

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Projekt

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Návaznosti

Z - Vyzkumny zamer (s odkazem do CEZ)

Rok uplatnění

2003

Kód důvěrnosti údajů

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

Název statě ve sborníku

Nové trendy rozvoje průmyslu Sborník příspěvků

ISBN

80-214-2354-4

ISSN

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e-ISSN

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Počet stran výsledku

7

Strana od-do

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Název nakladatele

VUT Brno

Místo vydání

Brno

Místo konání akce

Brno

Datum konání akce

4. 12. 2002

Typ akce podle státní příslušnosti

EUR - Evropská akce

Kód UT WoS článku

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