Simulation hedge investment portfolios through options portfolio
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...
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| Main Authors: | , , |
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| Format: | EJournal Article |
| Published: |
Institute of Advanced Engineering and Science,
2019-11-01.
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| Subjects: | |
| Online Access: | Get fulltext |
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| Summary: | 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. |
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| Item Description: | https://ijeecs.iaescore.com/index.php/IJEECS/article/view/17936 |