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3

Draw a picture. For each scenario, there are obvious circumstances that the payoff for each would be better. For the N day option, the payoff would be better if there was a slow gradual decline in price and a slow gradual increase over the same period, such that the final difference in the price of the underlying was largely unchanged. For multiple options ...


3

This really isn't worth the bounty, but it's too long for a comment. Quoting https://www.tradeking.com/education/options/option-greeks-explained#theta At-the-money options move at the square root of time. This means if a one-month ATM option is trading for \$1, then a two-month ATM option would be trading for 1 x sqrt of 2 or \$1.41. A three-month ...


2

I would do regression analysis with a dummy variable. Take a large sample of companies, and add a 0 - 1 dummy variable where that variable is equal to 1 if it meets the momentum and refi criteria, and 0 otherwise. The coefficient will indicate the magnitude and the t-statistic the significance.


2

In this case it is important to differentiate between a liability-driven investment strategy (LDI) and a (the classical) benchmark-driven investment strategy. The first one is what you need in this case. LDI was first established by Martin Leibowitz in 1986 ("Liability returns: A new perspective on asset allocation"). So googling that might help you ...


1

Strategy A has fatter tails and should outperform when the volatility surface is convex. Note that both strategies have the same average option maturity = N/2 days. However, for Strategy A option maturity fluctuates between 0 and N days, while for Strategy B the average maturity is always N/2 days (after the initial N day run up to full investment). For ...



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