Portfolio sensitivity to changes in the maximum and the maximum drawdown
Libor Pospisil and
Jan Vecer
Quantitative Finance, 2010, vol. 10, issue 6, 617-627
Abstract:
In this article, we define new 'Greeks' for financial derivatives: sensitivities to the running maximum and the running maximum drawdown of an underlying asset. Some types of portfolios, such as the net asset value of a hedge fund or performance fees, are sensitive to these parameters. In order to illustrate the concept of the new 'Greeks', we derive probabilistic representations of sensitivities for two classes of financial contracts: forwards on the maximum drawdown and lookback options. These results allow us to interpret the delta-hedge of the contracts in a novel way.
Keywords: Asian options; Derivatives pricing; Derivatives hedging; Derivatives securities (search for similar items in EconPapers)
Date: 2010
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (23)
Downloads: (external link)
http://www.tandfonline.com/doi/abs/10.1080/14697680903008751 (text/html)
Access to full text is restricted to subscribers.
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:taf:quantf:v:10:y:2010:i:6:p:617-627
Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/RQUF20
DOI: 10.1080/14697680903008751
Access Statistics for this article
Quantitative Finance is currently edited by Michael Dempster and Jim Gatheral
More articles in Quantitative Finance from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().