Questions tagged [hedge]
76 questions
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Pros and Cons of SPY hedging strategies
Imagine someone bought 100K SPY as a long term investment. Now he wants to hedge against the downside risk of 10% or more. He is considering the following options:
Buy UVXY which is a 1.5X VIX ETF inversely correlated with SPY. If one buys 5K, in…
pappu
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Hedge cost Exotic payoff
For an exotic payoff with no analytical formula, the standard is to use MC simulation or solve a PDE.
On the other hand the price should be the future hedge costs with the hedge ratios implied by the model.
How can we reconcile both approaches? I…
JiLight
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Min variance Hedge II
In a paper from Energy Risk - "Delta hedging the load serving deal", the author shows how to calculate the min variance hedge for a portfolio of two underlying assets. I've added a picture of the relevant section (I don't think I can upload the…
Chet
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Hedging against exchange risk
How does one hedge against any exchange risk?
A Japanese exporter has a €1,000,000 receivable due in one year. Detail a strategy using a money market hdege that will eliminate any exchange rate risk.
1-year rates of…
3kstc
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Formula 4.10 in Volatility Trading by Sinclair
I'm reading "Volatility Trading" by Sinclair and am confused about formula 4.10. I hope someone of you can enlighten me :)
What he's saying there is that he purchases a call option and wants to hedge it with a quantity h:
Value of portfolio = C - h…
bobbel
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Hedge position formula interpretation
I've been given a formula that has to do with the calculation of hedge position, but I'm struggling to understand it. I'm really new to financial Maths or financial in general.
The formula is: $\frac{-\beta_{asset} \times p_{asset} \times…
