Arbeitspapier
Feedback effects of dynamic hedging strategies in the presence of transaction costs
We study the destabilising effect of dynamic hedging strategies on the price of the underlying in the presence of sunk costs of transaction. Once sunk costs of transaction are taken into account, continuous portfolio rehedging is no longer an optimal strategy. Using a non-optimising (local in time) strategy for portfolio rebalancing, explicit dynamics for the price of the underlying are derived, focusing in particular on the excess volatility and feedback effects of these portfolio insurance strategies. Further, we show how these latter depend on the heterogeneity of the insured payoffs. Finally, conditions are derived under which it may still be reasonable, from a practical viewpoint, to implement Black - Scholes strategies.
- Sprache
-
Englisch
- Erschienen in
-
Series: Quaderni - Working Paper DSE ; No. 445
- Klassifikation
-
Wirtschaft
- Ereignis
-
Geistige Schöpfung
- (wer)
-
Andergassen, Rainer
Agliardi, Elettra
- Ereignis
-
Veröffentlichung
- (wer)
-
Alma Mater Studiorum - Università di Bologna, Dipartimento di Scienze Economiche (DSE)
- (wo)
-
Bologna
- (wann)
-
2002
- DOI
-
doi:10.6092/unibo/amsacta/4851
- Handle
- Letzte Aktualisierung
-
10.03.2025, 11:44 MEZ
Datenpartner
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. Bei Fragen zum Objekt wenden Sie sich bitte an den Datenpartner.
Objekttyp
- Arbeitspapier
Beteiligte
- Andergassen, Rainer
- Agliardi, Elettra
- Alma Mater Studiorum - Università di Bologna, Dipartimento di Scienze Economiche (DSE)
Entstanden
- 2002
Ähnliche Objekte (12)
On Leland's option hedging strategy with transaction costs
Hedging options including transaction costs in incomplete markets
Optimal Hedging Strategies for Multi-periodGuarantees in the Presence of Transaction Costs:A Stochastic Programming Approach
Delivering left-skewed portfolio payoff distributions in the presence of transaction costs
Markets and transaction costs
Transaction Management: Value Creation by Reducing Transaction Costs
Multinational Corporations and Transaction Costs
Transaction costs and value premium
Simple bounds for transaction costs
Transaction costs of Kyoto mechanisms
Transaction Costs in Housing Markets
Markowitz portfolios under transaction costs
On Leland's option hedging strategy with transaction costs
Hedging options including transaction costs in incomplete markets
Optimal Hedging Strategies for Multi-periodGuarantees in the Presence of Transaction Costs:A Stochastic Programming Approach
Delivering left-skewed portfolio payoff distributions in the presence of transaction costs
Markets and transaction costs
Transaction Management: Value Creation by Reducing Transaction Costs
Multinational Corporations and Transaction Costs
Transaction costs and value premium
Simple bounds for transaction costs
Transaction costs of Kyoto mechanisms
Transaction Costs in Housing Markets
Markowitz portfolios under transaction costs
On Leland's option hedging strategy with transaction costs
Hedging options including transaction costs in incomplete markets
Optimal Hedging Strategies for Multi-periodGuarantees in the Presence of Transaction Costs:A Stochastic Programming Approach
Delivering left-skewed portfolio payoff distributions in the presence of transaction costs
Markets and transaction costs
Transaction Management: Value Creation by Reducing Transaction Costs
Multinational Corporations and Transaction Costs
Transaction costs and value premium
Simple bounds for transaction costs
Transaction costs of Kyoto mechanisms
Transaction Costs in Housing Markets