Option Strategies with linear programming
AbstractIn practice, all option strategies are decided in advance, given the investor’s 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 Ericsson’s call and puts options.
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Bibliographic InfoPaper provided by EconWPA in its series Finance with number 0505005.
Date of creation: 04 May 2005
Date of revision:
Note: Type of Document - pdf. Published in European Journal of Operational research 157 (2004) 246-256
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Finance; option portfolios; Linear programming;
Other versions of this item:
- G - Financial Economics
This paper has been announced in the following NEP Reports:
- NEP-ALL-2005-05-07 (All new papers)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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20834, University Library of Munich, Germany.
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- 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.
- Sinha, Pankaj & Gupta, Akshay & Mudgal, Hemant, 2010. "Active Hedging Greeks of an Options Portfolio integrating churning and minimization of cost of hedging using Quadratic & Linear Programing," MPRA Paper 25707, University Library of Munich, Germany.
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