HEDGING GREEKS FOR A PORTFOLIO OF OPTIONS USING LINEAR AND QUADRATIC PROGRAMMING

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Published: Dec 18, 2012
DOI: https://doi.org/10.5750/jpm.v4i1.471

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Pankaj Sinha
Faculty of Management Studies, University of Delhi
Archit Johar
Department of Computer Engineering, Netaji Subhas Institute of technology University of Delhi

Abstract

The aim of this paper is to develop a hedging methodology for making a portfolio of options delta, vega and gamma neutral by taking positions in other available options, and simultaneously minimizing the net premium to be paid for the hedging. A quadratic programming solution for the problem is formulated, and then it is approximated to a linear programming solution. A prototype for the linear programming solution has been developed in MS Excel using VBA.

Article Details

Issue
Vol. 4 No. 1 (2010)
Section
Articles

References

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