Tagged Questions
5
votes
0answers
100 views
Replicating portfolio and risk-neutral pricing for interest rate options
For equity options, the pricing of options depends on the existence of a replicating portfolio, so you can price the option as the constituents of that replicating portfolio. However, I am not seeing ...
14
votes
3answers
1k views
Why hold options when you can dynamically replicate their payoff?
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 ...
5
votes
1answer
338 views
How to calculate equivalent futures position?
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 ...
4
votes
1answer
1k views
How to replicate a digital call option
Call Option S=100 K=100 Payoff=1 (option is not available) How can i replicate this (payoff) with calls and puts with strike prices with multiples of 5$
Thanks for help
