In my previous job, a fund of funds, they used 3 months forward FX contracts (renewed every 3 months) to protect their portfolio against currency risk. If I do understand why forwards are useful for ...
From this paper. page 3 We get that the total profit at expiration is the difference in value between the price of the option with actual volatility and the one with implied volatility. I have tried ...
I have calculated a hedge ratio that generates a mean reverting spread (stationary, without trends) 60-70% of the time. But the remaining 30% of the time, it seems like there is a trend in the spread. ...
Suppose we hedge an index option using futures on that index. How would the hedging strategy be different if the underlying could be traded directly (from a risk point of view)?
I am struggling with the correctness of the return calculation for a portfolio when the hedge fund receives capital inflow mid-month. Putting it simply, suppose the fund has 100 million on Dec. 1, ...
Is my intuition correct? If we buy a put we want to hedge against price increasing, so we buy the underlier. If price increases, the absolute value of delta decreases so we need to reduce our hedge ...