Suppose I have a portfolio of European index options (long call, short put) and risk free assets (buy bank bills) to create a synthetic long index position. I wish to unitise this portfolio to individually account for inflows and outflows. Is there literature describing how this might be done? Suppose also that I wish to create a short index portfolio (short calls, long puts and sell bank bills). Is there literature describing how such a portfolio might be unitised?
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4$\begingroup$ What is unitising? $\endgroup$– Bob Jansen ♦Sep 17, 2021 at 12:08
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$\begingroup$ investopedia.com/terms/u/unitized-fund.asp $\endgroup$– IMCOSep 18, 2021 at 13:16
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$\begingroup$ In brief you have to (1) keep track of how many Units you have issued (when customers invest you create more units and when they redeem you decrease the number of units), (2) keep track of the dollar value (NAV) of the portfolio, (3) divide the latter by the former to find the NAV per share. The process is the same for any pooled investment vehicle (mutual fund, investment partnership, etc), having options in the pfolio does not change anything. $\endgroup$– nbbo2Sep 18, 2021 at 18:40
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$\begingroup$ Well (for example) do I unitise the notional value of the position or the value of the bank bill? How do I account for the net option premium receipt/cost? If I unitise a short portfolio do I end up with positive numbers of units and negative unit values or vice versa? $\endgroup$– IMCOSep 19, 2021 at 21:37
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