Conservative Delta Hedging
نویسنده
چکیده
It is common to have interval predictions for volatilities and other quantities governing securities prices. The purpose of this paper is to provide an exact method for converting such intervals into arbitrage based prices of financial derivatives or industrial or contractual options. We call this procedure conservative delta hedging. The proposed approach will permit an institution’s management a greater oversight of its exposure to risk.
منابع مشابه
The interpolation of options
Conservative delta hedging permits traders to pass from nonparametric bounds on interest rates and volatilities to trading strategies. The uncertainty reflected in the bounds, however, provides relatively high starting prices for these strategies. We here show how the effect of uncertainty to a substantial extent can be offset by interpolation, i.e., the hedging in auxiliary market traded secur...
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