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 was asked this in an interview and I messed it up lol. This might actually be really basic. Let's say I signed a forward contract to buy NASDAQ at 4000 one year from now. How can I hedge this cash ...