Advanced Search
MyIDEAS: Login

Option Strategies with linear programming


Author Info

  • Christos Papahristodoulou

    (Mälardalen University, School of Business)


In 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.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL:
Download Restriction: no

Bibliographic Info

Paper provided by EconWPA in its series Finance with number 0505005.

as in new window
Date of creation: 04 May 2005
Date of revision:
Handle: RePEc:wpa:wuwpfi:0505005

Note: Type of Document - pdf. Published in European Journal of Operational research 157 (2004) 246-256
Contact details of provider:
Web page:

Related research

Keywords: Finance; option portfolios; Linear programming;

Other versions of this item:

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:


References listed on IDEAS
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.:
as in new window
  1. Black, Fischer & Scholes, Myron S, 1973. "The Pricing of Options and Corporate Liabilities," Journal of Political Economy, University of Chicago Press, vol. 81(3), pages 637-54, May-June.
Full references (including those not matched with items on IDEAS)


Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Gao, Pei-wang, 2009. "Options strategies with the risk adjustment," European Journal of Operational Research, Elsevier, vol. 192(3), pages 975-980, February.
  2. 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.
  3. Sinha, Pankaj & Johar, Archit, 2010. "Hedging Greeks for a portfolio of options using linear and quadratic programming," MPRA Paper 20834, University Library of Munich, Germany.


This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.


Access and download statistics


When requesting a correction, please mention this item's handle: RePEc:wpa:wuwpfi:0505005. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (EconWPA).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.