Inverse Vertical Ratio Put Spread Strategy and its Application in Hedging Against a Price Drop
AbstractThe paper proposes a generalization of a strategy known as the Long Two Buy One Ratio Put or Put Backspread Strategy. Moreover, it proposes an application of the strategy in hedging against a price drop of the underlying asset to a future date in a way which enables hedging with zero cost. We have found a profit function, as well as a function of income from a hedged position in the analytical form, which simplifies the application in particular hedging.
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Bibliographic InfoArticle provided by ASERS Publishing in its journal Journal of Advanced Studies in Finance.
Volume (Year): I (2010)
Issue (Month): 1 (June)
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Web page: http://www.asers.eu/journals/jasf.html
option strategy; hedging; price drop; profit function; premium zero cost;
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