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Minimizing the risk of a financial product using a put option

(2010) JOURNAL OF RISK AND INSURANCE. 77(4). p.767-800
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Abstract
In this article, we elaborate a method for determining the optimal strike price for a put option, used to hedge a position in a financial product such as a basket of shares and a bond. This strike price is optimal in the sense that it minimizes, for a given budget, a class of risk measures satisfying certain properties. Formulas are derived for one single underlying as well as for a weighted sum of underlyings. For the latter we will consider two cases depending on the dependence structure of the components in this weighted sum. Applications and numerical results are presented.
Keywords
MANAGEMENT, SUMS, RANDOM-VARIABLES, BOUNDS, COMONOTONICITY, ACTUARIAL SCIENCE

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Citation

Please use this url to cite or link to this publication:

Chicago
Deelstra, Griselda, Michèle Vanmaele, and David Vyncke. 2010. “Minimizing the Risk of a Financial Product Using a Put Option.” Journal of Risk and Insurance 77 (4): 767–800.
APA
Deelstra, G., Vanmaele, M., & Vyncke, D. (2010). Minimizing the risk of a financial product using a put option. JOURNAL OF RISK AND INSURANCE, 77(4), 767–800.
Vancouver
1.
Deelstra G, Vanmaele M, Vyncke D. Minimizing the risk of a financial product using a put option. JOURNAL OF RISK AND INSURANCE. 2010;77(4):767–800.
MLA
Deelstra, Griselda, Michèle Vanmaele, and David Vyncke. “Minimizing the Risk of a Financial Product Using a Put Option.” JOURNAL OF RISK AND INSURANCE 77.4 (2010): 767–800. Print.
@article{1245600,
  abstract     = {In this article, we elaborate a method for determining the optimal strike price for a put option, used to hedge a position in a financial product such as a basket of shares and a bond. This strike price is optimal in the sense that it minimizes, for a given budget, a class of risk measures satisfying certain properties. Formulas are derived for one single underlying as well as for a weighted sum of underlyings. For the latter we will consider two cases depending on the dependence structure of the components in this weighted sum. Applications and numerical results are presented.},
  author       = {Deelstra, Griselda and Vanmaele, Mich{\`e}le and Vyncke, David},
  issn         = {0022-4367},
  journal      = {JOURNAL OF RISK AND INSURANCE},
  keyword      = {MANAGEMENT,SUMS,RANDOM-VARIABLES,BOUNDS,COMONOTONICITY,ACTUARIAL SCIENCE},
  language     = {eng},
  number       = {4},
  pages        = {767--800},
  title        = {Minimizing the risk of a financial product using a put option},
  url          = {http://dx.doi.org/10.1111/j.1539-6975.2010.01365.x},
  volume       = {77},
  year         = {2010},
}

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