Tid: 29 april 2011 kl 10.15-11.00. (Observera dagen och tiden)Seminarierummet 3721, Institutionen för matematik, KTH, Lindstedts väg 25, plan 7. Karta!
Föredragshållare: Liang Zhong
Titel: Betting on Volatility: A Delta Hedging Approach (Examensarbete - Master thesis)
Abstract In the financial market, investors prefer to estimate the stock price based on historical volatility or implied volatility from the market. Consider a trader who believes the historical or implied volatility of an option is too high; the trader can capitalize on this information by selling the option short and buying the delta hedge. The question is which volatility to use in the delta hedge; the trader's view on volatility σT or the market's implied volatility σI. This thesis investigates the performance, under different market conditions, of the two choices, the trader's view σT and the market's view σI. Recently, traders in the option market try to bet on the volatility for the future prices, i.e. betting on a lower volatility. A number of delta hedging models will be discussed in this paper. We will see whether we use lower volatility in the trader's view or the market's implied volatility to forecast the asset price and hedge the risk. All the models in this paper will be built in a complete market. We will see some sensitive movements of the hedging options strategy after choosing different volatility. Moreover, after adding the transaction cost in every trading, we perhaps meet the bad results when applying delta hedge. How to manage the hedging schemes and what the number of maturity date we should take will be studied in this paper as well.
|Sidansvarig: Filip Lindskog