Hedging at-the-money digital options near maturity (Q6164847)
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scientific article; zbMATH DE number 7706931
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| English | Hedging at-the-money digital options near maturity |
scientific article; zbMATH DE number 7706931 |
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Hedging at-the-money digital options near maturity (English)
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4 July 2023
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A financial model is provided to evaluate both dynamic and static hedging, e.g. near the maturity. This leads to an optimization problem, the aim being to minimize the probability of sub-hedging the digital option at maturity. The authors provide the following elements (among others): computation of delta Greek of a digital call option; computation of the bull spread (in GBM and Heston model); optimization problem with a gradient method in case of GBM model; calibration of the CGMY model. A section is devoted to some illustrations of these contributions by means of a variety of numerical experiments.
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digital option
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short maturity
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at-the-money
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hedging
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bull call spread
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Black-Scholes
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Heston model
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CGMY model
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0.7370959520339966
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0.7301218509674072
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0.716728150844574
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0.7154593467712402
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