Hedging Greeks for a Portfolio of Options Using Linear and Quadratic Programming
The aim of this paper is to develop a hedging methodology for making a portfolio of options delta, vega and gamma neutral by taking positions in other available options, and simultaneously minimizing the net premium to be paid for the hedging. A quadratic programming solution for the problem is formulated, and then it is approximated to a linear programming solution. A prototype for the linear programming solution has been developed in MS Excel using VBA.
Volume (Year): 4 (2010)
Issue (Month): 1 (May)
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