AN ANALYSIS OF THE RISK IN DISCRETELY REBALANCED OPTION HEDGES AND DELTA-BASED TECHNIQUES

• 成果类型: Article
• 署名作者: ROBINS, RP; SCHACHTER, B
• 署名单位: Tulane University
• 刊物名称: MANAGEMENT SCIENCE
• ISSN/ISSBN: 0025-1909
• DOI: 10.1287/mnsc.40.6.798
• 发表日期: 1994
• 页码: 798-808
• 关键词: HEDGE; OPTION; delta; DISCRETE REBALANCING

摘要

The stochastic properties of discretely rebalanced option hedges have been studied extensively beginning with Black and Scholes (1973). In each analysis hedges were ''delta-neutral'' after rebalancing. We argue that the distributional properties of discretely rebalanced hedges are such that delta-based hedging is not the variance minimizing strategy. This paper obtains analytical expressions for the variance minimizing option hedge ratios. We also evaluate the hedge variance to assess the magnitude of the variance reduction over delta-based hedges. For representative parameter values, we show that systematic departures from delta-based hedges can yield significant reductions in hedge variance even for one day rebalancing intervals.