Option strategies with linear programming
AbstractIn practice, all option strategies are decided in advance, given the investorâs belief of the stock price. In this paper, instead of deciding in advance the most appropriate hedging option strategy, an LP problem is formulated, by considering all significant Greek parameters of the Black-Scholes formula, such as delta, gamma, theta, rho and kappa. The optimal strategy to select will be simply decided by the solution of that model. The LP model is applied to Ericssonâs call and puts options.
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Bibliographic InfoArticle provided by Elsevier in its journal European Journal of Operational Research.
Volume (Year): 157 (2004)
Issue (Month): 1 (August)
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- Sinha, Pankaj & Gupta, Akshay & Mudgal, Hemant, 2010.
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25707, University Library of Munich, Germany.
- Pankaj Sinha & Akshay Gupta & Hemant Mudgal, 2010. "Active Hedging Greeks of an Options Portfolio Integrating Churning and Minimization of Cost of Hedging Using Quadratic & Linear Programing," Journal of Prediction Markets, University of Buckingham Press, vol. 4(2), pages 1-14, September.
- Gao, Pei-wang, 2009. "Options strategies with the risk adjustment," European Journal of Operational Research, Elsevier, vol. 192(3), pages 975-980, February.
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