Proactive hedging European call option pricing with linear position strategy
type: Item
instance of: scholarly article
title: Proactive hedging European call option pricing with linear position strategy
zbMATH Open document ID: 1422.91712
DOI: 10.1155/2018/2087145
author: Xianqiang Yang
published in: Discrete Dynamics in Nature and Society
publication date: 2019-02-20T00:00:00Z
review text: Summary: Proactive hedging option is an exotic European stock option designed for hedgers. Such option requires option holders to buy in (or sell out) the underlying asset (stock) and allows them to adjust the holdings of the underlying asset per its price changes within an option period. The proactive hedging option is an attractive choice for hedgers because its price is lower than that of classical options and because it completely hedges the risk of exposure for option holders. In this study, the underlying asset price movement is assumed to follow geometric fractional Brownian motion. The pricing formula for proactive hedging call options is derived with a linear position strategy by applying the risk-neutral evaluation principle. We use simulations to confirm that the price of this exotic option is always no more than that of the classical European option under the same parameters.
Mathematics Subject Classification ID: 91G20
zbMATH DE Number: 7026514
MaRDI profile type: Publication
full work available at URL: https://doi.org/10.1155/2018/2087145
OpenAlex ID: W2892068125
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Wikidata QID: Q129250332
description: scientific article; zbMATH DE number 7026514