1 / 13

Portfolio-level Delta Hedging

Portfolio-level Delta Hedging. Stefano Grazioli. Critical Thinking. Overall good Easy meter. The Hedge Tournament. Questions? Teams on Collab. Delta Hedging. With a portfolio of related securities. Delta of a Portfolio. We have seen the 1:1 approach to Delta Hedging

birch
Download Presentation

Portfolio-level Delta Hedging

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript


  1. Portfolio-levelDelta Hedging Stefano Grazioli

  2. Critical Thinking • Overall good • Easy meter

  3. The Hedge Tournament • Questions? • Teams on Collab

  4. Delta Hedging With a portfolio of related securities

  5. Delta of a Portfolio • We have seen the 1:1 approach to Delta Hedging • What if I have more than one type of derivative with the same underlier in my portfolio? • Delta hedging still applies... and it can be made even better!

  6. Delta of a Family Portfolio Dportfolio = Sqtyi * di

  7. Delta Neutral Portfolio • Perfectly hedged portfolio has Delta = 0 • This means that the sum of the values of the positions that relate to a specific stock (long, short, call, put) does not change as the stock price changes.

  8. Assume that the underlier is Google Dportfolio = Sqtyi * di 1000 * 0.53 – 2000 * 0.46 – 500 * (-0.51) = -135 -135 + 135 = 0 long call short call (different strike) Delta for the portfolio short put Initial Delta Delta that is necessary to makethe portfolio delta neutral Delta of a Portfolio of Related Securities

  9. Key Portfolio Decision • I need +135 delta on my GOOG portfolio, how do I get it? • Buy stocks • Buy calls (delta > 0) • Sell puts (delta < 0) • SellShort puts • Pros/cons: cash, horizon, cost, tc, stability

  10. Example Delta for the portfolio of GOOGLE positions:+2,420

  11. WINIT What Is NewIn Technology?

  12. Homework Spartan Trader

More Related