A Note on Hedging Errors in Discretely Hedged Options and Portfolios

In this paper we derive an analytical formula for the variance of the hedging error for European options when hedging discretely with equal time steps. The result is further generalized to a portfolio of options with different maturities and strikes. Copyright © 2010 Wilmott Magazine Ltd.

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Bibliographische Detailangaben
Veröffentlicht in:	Wilmott journal 2010-10, Vol.2 (5), p.261-270
Hauptverfasser:	Rojek, Yury, Wilmott, Paul
Format:	Artikel
Sprache:	eng
Schlagworte:	Black-Scholes equation delta hedging discrete hedging options options portfolio
Online-Zugang:	Volltext
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Beschreibung
Zusammenfassung:	In this paper we derive an analytical formula for the variance of the hedging error for European options when hedging discretely with equal time steps. The result is further generalized to a portfolio of options with different maturities and strikes. Copyright © 2010 Wilmott Magazine Ltd.
ISSN:	1759-6351 1759-636X
DOI:	10.1002/wilj.37