volume 3, issue 1, P51-180 1997
DOI: 10.1017/s1357321700005316
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M.H.D. Kemp

Abstract: ABSTRACTThis paper draws analogies between techniques used to reserve for, control and manage derivatives and techniques used by actuaries in other fields. It concentrates on equity derivatives. It also includes a review of the factors which significantly influence the appropriate size of reserves to hold for a derivatives portfolio. These include the likelihood of market jumps, uncertainty in future market volatility and the size of transaction costs, as well as on more obvious factors like position risk.