New answers tagged hedging
2
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Purpose of Vega Hedging
Doing away with jargon for a bit, it is wise to hedge every risk factor present in your portfolio. Implied vol is one of them, just like the spot.
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Purpose of Vega Hedging
It depends on the strategy. The position seller suffers a lot from vega. He can try to balance the portfolio but it unbalances the delta gamma hedge. It also depends on the time until maturity. If you ...
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Classic dynamic delta-gamma hedging in Python
Problem is at the tail of this:
PnL_final = Pnl + strategy[:,-2] * s[:,-1] + gamma1[:,-2]/gamma2[:,-2]*callprice(s[:,-1], k, T2-ttm[-1], sigma, r)/interest - np.max(s[:,-1]-k,0)
It should be a &...
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Difference between replicating portfolio and option price
I did not read the paper, but looking at your description and from my understanding, it seems like a straightforward replication of delta hedging the option.
For example, if we wish to delta-hedge a ...
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