Market Risk and Model Risk for a Financial Institution Writing Options
β Scribed by T. Clifton Green; Stephen Figlewski
- Book ID
- 108502876
- Publisher
- John Wiley and Sons
- Year
- 1999
- Tongue
- English
- Weight
- 155 KB
- Volume
- 54
- Category
- Article
- ISSN
- 0022-1082
No coin nor oath required. For personal study only.
π SIMILAR VOLUMES
Project No. 2858. 'Brown (1985) modifies the model used by both Johnson (1959-1960) and Stein (1961) by using returns in place of price levels, and his empirical results tend to support the traditional hedge when the objective is risk minimization.
The article investigates how sensitive different dynamic and static hedge strategies for barrier options are to model risk. It is found that using plainvanilla options to hedge offers considerable improvements over usual β¬ hedges. Further, it is shown that the hedge portfolios involving options are