Black Scholes Pricing and Dynamic Hedging

2016 ◽  
Author(s):  
Ilya I. Gikhman
Keyword(s):  
Dynamic Hedging ◽  
Black Scholes

Price risk management by using dynamic hedging based on advanced Black–Scholes model

2020 ◽  
Vol 07 (01) ◽  
pp. 2050011
Author(s):  
Peili Lu ◽  
Jiaqi Shen ◽  
Liheng Zhao ◽  
Haoyang Qin ◽  
Xunzhi Liu ◽  
...  
Keyword(s):  
Risk Management ◽  
Evaluation Method ◽  
Commodity Price ◽  
Price Risk ◽  
Dynamic Hedging ◽  
Hedging Strategy ◽  
Replication Method ◽  
Black Scholes Model ◽  
Black Scholes ◽  
Price Risk Management

Price Risk Management plays an important role in Commodity trading and corporate purchasing or Sales plan. Futures are used to hedge the price risk which is linear, while options are used for the nonlinear one. This paper proposes an evaluation method of dynamic hedging strategy for corporate hedging commodity price risk based on advanced Black–Scholes Model. By using the inverse replication method, we get the dynamic hedging strategy which uses futures to replicate options. Finally, we apply the dynamic hedging strategy for corporate purchases and sales to either lower purchase cost or maintain the sales price.

Does model misspecification matter for hedging? A computational finance experiment based approach

2015 ◽  
Vol 02 (03) ◽  
pp. 1550023 ◽  
Author(s):  
Youfa Sun ◽  
George Yuan ◽  
Shimin Guo ◽  
Jianguo Liu ◽  
Steven Yuan
Keyword(s):  
Hybrid Model ◽  
Model Misspecification ◽  
Expansion Method ◽  
Jump Diffusion ◽  
Numerical Results ◽  
Computational Finance ◽  
Dynamic Hedging ◽  
Diffusion Term ◽  
Black Scholes ◽  
Experimental Market

To assess whether the model misspecification matters for hedging accuracy, we carefully select six increasingly complicated asset models, i.e., the Black–Scholes (BS) model, the Merton (M) model, the Heston (H) model, the Heston jump-diffusion (HJ) model, the double Heston (dbH) model and the double Heston jump-diffusion (dbHJ) model, and then impartially evaluate their performances in mitigating the risk of an option, under a controllable experimental market. In experiments, the ℙ measure asset paths are piecewisely simulated by a hybrid-model (including the Black–Scholes-type and the (double) Heston-type, with or without jump-diffusion term) with randomly given properly defined parameters. We access the hedging accuracy of six models within the operational dynamic hedging framework proposed by sun (2015), and apply the Fourier-COS-expansion method (i.e., the COS formula, Fang and Oosterlee (2008) to price options and to calculate the Greeks). Extensive numerical results indicate that the model misspecification shows no significant impact on hedging accuracy, but the market fit does matter critically for hedging.

Reply to Mikheev's Comment on the Black-Scholes Pricing Problem

1995 ◽  
Vol 5 (2) ◽  
pp. 219-220 ◽  
Author(s):  
J. P. Bouchaud ◽  
D. Sornette
Keyword(s):  
Black Scholes

Die Black-Scholes-Optionspreisformel

2001 ◽  
Vol 30 (7) ◽  
pp. 355-361
Author(s):  
Lutz Hahnenstein ◽  
Sascha Wilkens ◽  
Klaus Röder
Keyword(s):  
Black Scholes

Black-Scholes-Formel

Controlling ◽  
2001 ◽  
Vol 13 (6) ◽  
pp. 315-318 ◽  
Author(s):  
Markus Schmitt
Keyword(s):  
Black Scholes

Der Hebel als Maßstab zur Beurteilung der Kurssteigerungschancen von Kauf- und Verkaufsoptionen sowie Optionsscheinen

1990 ◽  
Vol 2 (1) ◽  
Author(s):  
Johannes Wekker ◽  
Joachim Ulrich
Keyword(s):  
Black Scholes

Die Bedeutungvon Optionen in der Börsenlandschaft hat stark zugenommen. Derzeit werden mehr als hundert Optionsscheine und covered warrants gehandelt. Darüberhinaus gibt es den Optionshandel der traditionellen Börsen sowie der Deutschen Terminbörse (DTB). Die althergebrachten Kennziffern zur Beurteilung der Preiswürdigkeit und der Kurssteigerungschancen von Optionen, Aufgeld und Hebel, erfüllen ihre Funktionen nur sehr unvollkommen, ja in vielen Fällen führen sie in die Irre. Die seit 1973 in den USA entwickelte Optionspreistheorie („Black/Scholes-Formel“) ermöglicht exakte Kennziffern zur Beurteilung von Preiswürdigkeit und Kurssteigerungen von Optionen.

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