Options strategies for international portfolios with overall risk management via multi-stage stochastic programming

Libo Yin () and Liyan Han

Annals of Operations Research, 2013, vol. 206, issue 1, 557-576

Abstract: This paper proposes a multi-stage stochastic programming model to explore optimal options strategies for international portfolios with overall risk management on Greek letters, extending existing Greek-based analysis to dynamic and nondeterministic programming under uncertainty. The contribution to the existing literature are overall control on the time-varying Greek letters, state-contingent decision dynamics in consistent with the projected outcomes of the changing information, and a holistic view for optimizing the portfolio of assets and options. Empirical results show the model possesses considerable benefits in terms of larger profit margins, greater stability of returns and higher hedging efficiency compared to traditional methods. Copyright Springer Science+Business Media New York 2013

Keywords: Options strategies; Risk management; Multi-stage stochastic programming; Greek letters (search for similar items in EconPapers)
Date: 2013
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DOI: 10.1007/s10479-013-1375-7

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