# Tag Info

Accepted

### Brownian motion Price and Hedge problem

Step 1: Know your distribution Since $\int_0^t W_s\mathrm{d}s\sim N\left(0,\frac{1}{3}t^3\right)$, we have \begin{align*} S_t &= S_0 \exp\left( rt-\frac{1}{6}\sigma^2 t^3 + \sigma \int_0^t W_s\...
• 16k

### Credit Valuation adjustment (CVA) Hedges

To continue from uness' answer (edit: just seen the OP was very old, but will leave here anyway!) . The greeks will be every element of market risk to which the the CVA is sensitive. Writing in words ...
• 533

### Credit Valuation adjustment (CVA) Hedges

CVA is a price. Just like any price, you compute its sensitivities (greeks) and then use financial products to bring them as close to zero as possible. It's not possible to derive a hedging strategy ...
• 2,230

### Gamma and Gamma Hedge

I'm no special expert on options and their Greeks. However, I have had a decade plus experience of almost-daily discussions with a bank derivatives desk, on pin risk and the behaviour of autocallable, ...
• 5,071

### Pricing of autocallable structured product

Short answer: Do not use BS for AC Long answer: There are plenty of question here about this already. Typically it is priced via Monte Carlo but that is not a model, just an implementation of some ...
• 9,024

### Hedging with interest rate derivatives

I will work through a detailed example. I hope it helps. Suppose for simplicity that you are trying to hedge the interest rate risk of one simplistic debt instrument. Suppose that the obligor owes ...
• 12.5k
Accepted

### Calculating PCA hedge ratio for 3-leg spread

Let's use the following returns matrix, X ...
• 5,931
Accepted

### SX5E option hedge

This is just like any other option. For example, if you are trading an IBM option, you hedge with IBM stock, which doesn't expire at all, (obviously). You then sell your hedge in the gamma-storm ...
• 2,633

### How to get the weights for a beta neutral portfolio?

The author did not define what optimal means, therefore I assume here that we want to find portfolio that has $\beta=0$ and has minimum variance $\sigma^2_{\pi}$ for the expected return $\mu_{\pi}$. ...
• 876

### How do banks hedge their FX TARF trades?

Import TARFS are to first order a strip of up and out calls (with the barrier at the strike + target profit) funded by selling a strip of up and out puts (with the same barrier). So if you have a ...
• 1,080