The modified sequential hedging strategy: Hedger’s loss distribution

Autor:	V. R. Sobol, Andrey I. Kibzun
Rok vydání:	2015
Předmět:	Actuarial science Distribution (number theory) Control and Systems Engineering Econometrics Cost distribution Call option Asset (economics) Conditional probability distribution Electrical and Electronic Engineering Mathematics Exercise price Quantile
Zdroj:	Automation and Remote Control. 76:1931-1944
ISSN:	1608-3032 0005-1179
DOI:	10.1134/s000511791511003x
Popis:	We study the distribution of hedging costs for the seller of an American call option who uses the modified sequential hedging strategy. Buying and selling of the underlying asset is done when the underlying asset's price intersects a band that includes the exercise price. We obtain analytic expressions for conditional and unconditional distribution functions of the hedger's costs. The conditional distribution is found for a known number of intersections of the band by the underlying asset's course trajectory. We propose an algorithm for estimating the quantile of the cost distribution (VaR criterion) that uses the quantile values for the hedger's conditional cost distribution.
Databáze:	OpenAIRE
Externí odkaz:	https://explore.openaire.eu/search/publication?articleId=doi_________::881f6fee3396c60e43d469b891af0b88 https://doi.org/10.1134/s000511791511003x Zobrazit plný text záznamu Plný text ve formátu PDF