Evaluating the risk of portfolios with options

Elizabeth A. Sheedy and Robert G. Trevor

Journal of Risk

Abstract: ABSTRACT Many portfolio managers use options in their investment strategy, exacerbating the potential for asymmetric, time-varying, and discontinuous portfolio distributions. While the existence of such problems is commonly acknowledged, the issue of risk measurement for option-affected portfolios remains unresolved. This study examines the nature of risk for option-affected portfolios and considers whether simple measures of changing risk can adequately capture their complex dynamics. It is found that the main issue is not skewness (as is commonly supposed), but the fact that risk is changing. The implication is that option-affected (and other) portfolios can be meaningfully examined in a mean-variance framework using risk measures readily available to practitioners.

References: Add references at CitEc
Citations:

Downloads: (external link)
https://www.risk.net/journal-risk/2161100/evaluating-risk-portfolios-options (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:rsk:journ4:2161100

Access Statistics for this article

More articles in Journal of Risk from Journal of Risk
Bibliographic data for series maintained by Thomas Paine ().