Research for performance and sensitivity of covered warrants hedging strategies with transaction cost and constant volatility in China market

SHI, YUE (2012) Research for performance and sensitivity of covered warrants hedging strategies with transaction cost and constant volatility in China market. [Dissertation (University of Nottingham only)] (Unpublished)

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Abstract

With development of economy, covered warrant has been the most popular derivatives in China financial market. Choosing and appropriate hedging strategy is very important for the issuers of covered warrant avoid risk and get profit. The famous Black-Scholes model is the most widely used model for option pricing and hedging. However, because of the existence of transaction costs and it is unrealistic to hedge continuously in the real world, the Black-Scholes model and the delta dynamic hedging strategy which based on the Black-Scholes model are no longer effective. Thus this paper discussed and simulated 6 alternative discrete hedging strategies in evidence.

In order to choose an optimum hedging strategies, this paper focuses on researching performance and sensibility of these discrete hedging strategies with covered warrant of China Merchants Bank. This paper evaluates the hedging performance with measures of total hedging cost, net cash flow and yield rate. And this paper analyzed sensibility of 6 hedging strategies for hedging interval, volatility, strike price and hedging area.

Item Type: Dissertation (University of Nottingham only)
Depositing User: EP, Services
Date Deposited: 19 Jan 2015 15:37
Last Modified: 24 Oct 2016 22:58
URI: http://eprints.nottingham.ac.uk/id/eprint/25441

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