Short Combo Strategy Using Barrier Options and its Application in Hedging

Rusnáková, Martina; Šoltés, Vincent; Szabó, Zsuzsanna Katalin

doi:10.1016/s2212-5671(15)01379-9

Cited by 10 publications

(11 citation statements)

References 17 publications

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“…Also, Rusnáková and Šoltés (2012), Rusnáková (2015), Šoltés and Rusnáková, (2012;2013) deal with the hedging against a price increase or drop by means of different options strategies using vanilla and barrier options. Following the studies mentioned we analyse all possible ways of Short Call Ladder strategy creation using barrier options with the aim to hedge against a price increase.…”

Section: Methodsmentioning

confidence: 99%

Risk Management in Energy Sector Using Short Call Ladder Strategy

Harčariková¹,

Šoltés²

2016

MJE

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The purpose of the paper is to focus on selected aspects of the hedging using of Short Call Ladder strategy created by barrier options. Given barrier option strategies belong to the appropriate tools widely used for risk management with an effective solution for limiting the loss from underlying asset´s price development. There is investigated the motivations and practice of firms with regard to using options in their risk management activities. Methodology of the paper is based on European up and knock-in call options together with standard call and barrier call options in analytical expression, which are used for investigation of hedging strategies in increasing markets. According to Haug model, barrier option prices are calculated, due to lack of real data in the market. Based on theoretical models of suitable hedged profit functions in analytical expressions, there are analysed their benefits and risks point of view in general. The requirements of zerocost option strategy have to be met. Our theoretical results are applied to the Energy Select Sector SPDR ETF, where designed hedged portfolios are analysed and compared to each other with the recommendations for investors. According to our findings we can recommend the hedging variant 2A or 4 as the best variant ensuring the lowest costs at expected intervals of the shares spot price at the maturity date. However, the selection of the right hedged portfolio is based on suitable combinations of the strike prices, the lower and the upper barriers for the best hedging profit function´s achievement. JEL classification:G11, G13, G32

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Section: Methodsmentioning

confidence: 99%

Risk Management in Energy Sector Using Short Call Ladder Strategy

Harčariková¹,

Šoltés²

2016

MJE

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“…Particularly small companies face regulatory and tax constraints, administrative burdens and these factors limit their growth. Koráb and Poměnková (2014), Rusnáková and Šoltés, (2012) discuss the topic of the financial crisis and financing constraints of SMEs in Visegrad Countries which are quite similar to Slovakia. Lee, Sameen and Cowling (2015) examined the relation between the access to finance and the level of innovativeness of SMEs since the financial crisis.…”

Section: Difficulties In Financing Of Smes -Literature Reviewmentioning

confidence: 99%

Do SMEs in Slovakia face real difficulties in obtaining financing? Comparison of the studies from Slovakia and the EU

Ključnikov¹,

Majková²,

Schwendemann³

et al. 2016

Journal of International Studies

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Abstract. Financial crises and worsening economic and business conditions reduce the number of enterprises in Slovakia. Many relevant institutions declare that barriers for doing business are increasing and many small companies have problems with financing. We decided to compare several scientific research studies from Slovakia and provide an answer to the question: Do SMEs in Slovakia really have problems with obtaining financial resources or is it just an overused assumption? Do companies face this type of financial risk? The aim of this article is to bring an answer to this question on the basis of the results of two scientific research studies conducted in Slovakia and focused on business and finance. The first was conducted in cooperation with the Association of Young Entrepreneurs and the second was part of international research at the Pan-european University in Bratislava and The University of Tomáš Baťa in Zlín. Both were realized in 2011-2013.The paper compares the obtained evidence with the statistical data from the EU. The comparison of Slovak and EU results concerning the situation with SMEs access to financing in Slovakia allowed to identify the differences and similarities regarding the stated hypotheses. This comparison offers a wider view on the situation in Slovakia and other EU countries.The results of our Studies, Vol. 9, No 3, pp. 36-52. DOI: 10.14254/2071-8330.2016 Aleksandr Ključnikov, Monika Sobeková Majková Alexander Schwendemann, Christian Knogler Do SMEs in Slovakia face real diffi culties in obtaining fi nancing?Comparison of the studies from Slovakia and the EU 37 study provide interesting conclusions. Slovak research studies explain that problems with access to financing of SMEs are in some way more pressing than according to the EU statistical data, but all research studies provide clear evidence about the difficulties SMEs face in obtaining finance in Slovakia.

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“…Other authors affirm that the risk is the possibility of losses generated by changes in the factors that affect the value of an asset [12,13]. There is a wide range of financial instruments to mitigate market risk from the simplest strategy to the most complicated strategy [14]. Upward risk in an investment portfolio is a manifestation of market risk.…”

Section: Introductionmentioning

confidence: 99%

“…With the current high volatilities in the financial markets and the high degree of uncertainty in the general economic environment, financial options are adequate to mitigate market risk. With financial options, a large number of hedging strategies are created for any situation in the market [14].…”

Section: Introductionmentioning

confidence: 99%

Simulation hedge investment portfolios through options portfolio

Jiménez-Gómez

Acevedo-Prins

López

2019

IJEECS

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<p>This paper presents two hedging strategies with financial options to mitigate the market risk associated with the future purchase of investment portfolios that exhibit the same behavior as Colombia's COLCAP stock index. The first strategy consists in the purchase of a Call plain vanilla option and the second strategy in the purchase of a Call option and the sale of a Call option. The second strategy corresponds to a portfolio of options called Bull Call Spread. To determine the benefits of hedging and the best strategy, the Geometric Brownian Motion and Monte Carlo simulation is used. The results show that the two hedging strategies manage to mitigate market risk and the best strategy is the first one despite the fact that the Bull Call Spread strategy is lower cost.</p>

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Short Combo Strategy Using Barrier Options and its Application in Hedging

Cited by 10 publications

References 17 publications

Risk Management in Energy Sector Using Short Call Ladder Strategy

Risk Management in Energy Sector Using Short Call Ladder Strategy

Do SMEs in Slovakia face real difficulties in obtaining financing? Comparison of the studies from Slovakia and the EU

Simulation hedge investment portfolios through options portfolio

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