Optimized static hedging strategy and hedging error analysis for barrier options

障礙期權靜態對沖的優化策略及對沖誤差分析

Student thesis: Master's Thesis

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Author(s)

  • Ziyin ZHUANG

Related Research Unit(s)

Detail(s)

Awarding Institution
Supervisors/Advisors
  • Tom VINAIMONT (Supervisor)
Award date2 Oct 2008

Abstract

The aim of this thesis is to improve on the static hedging of barrier options based on the work of Carr and Chou (1997b). We propose a practical optimization scheme for the hedging strategy and demonstrate the application of the optimized static hedging to vanilla barrier options. We then compare the theoretical performance of the optimized static hedging with that of naïve static hedging and dynamic hedging. Finally we test the performance of the optimized static hedging for barrier options using market data of S&P500 call/put options traded on CBOE.

    Research areas

  • Hedging (Finance), Options (Finance)