I am looking for some paper or similar which deal with this topic: hedging bankruptcy on firm's debt using Put options written on that firm's equity price. This should be based on the assumption that ...
The theory of delta hedging a short position in an option is based on trades in the stock and cash. I.e. I get the option premium and take positions in the stock and cash. In the classical ...
I am wondering about studies regarding the uncanny options pricing into public company's earnings reports. The phenomenon being that the price of a straddle before earnings costs near exactly the ...
The derivation of the Black-Scholes model assumes no counterparty risk. Does the presence of counterparty risk invalidate the argument behind the model? EDIT: The question is about options in ...
It's not clear to me how to realize skewness. In other words, how do you implement skew arbitrage? There seems to be no well-known recipe like in volatility arbitrage. Volatility arbitrage (or ...
I am currently trying to understand the in's and out's of options and more specifically hedging. I came across a document that was talking about Delta Hedging which is just making sure the delta of ...
When holding vanilla options, you can cancel out, theoretically, all risk with dynamic (delta) hedging. Then you earn the "risk free rate of return". Why would you make such a portfolio when you can ...
Can one use options on Treasury bond futures to hedge a typical fixed income portfolio? If so, how can one estimate the duration for an option on a Treasury futures contract, and taking this a step ...
Let's say I have the following two positions: Buy ATM SPX call, expires in 1 month Sell ATM SPX put, expires in 1 month This creates a synthetic futures position. How do I calculate how many ...
Let's say I have two call option liabilities that I want to statically hedge with a single call option. Liabilities: Liab_Call_1: Strike: 100 Notional: 1000 DaysToExpiration: 20 Liab_Call_2: ...
As far as I understand, most investors are willing to buy options (puts and calls) in order to limit their exposure to the market in case it moves against them. This is due to the fact that they are ...