Using Options for Tail Risk Hedging

Vineer Bhansali ()
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Vineer Bhansali: LongTail Alpha

Chapter Chapter 13 in Derivatives Applications in Asset Management, 2025, pp 229-239 from Springer

Abstract: Abstract This chapter addresses tail risk hedging using options, focusing on how portfolio managers can proactively protect against rare but severe market events. The case demonstrates how portfolio managers can cushion portfolios against extreme downside risks while preserving exposure to the market upside by structuring and implementing options-based hedging strategies. A hypothetical scenario examines the practicalities of using OTM put options for hedging an equity portfolio, providing insight into their costs and performance under adverse conditions.

Keywords: Downside protection; Extreme events; Options strategies; Tail risk; Volatility premium (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:spr:sprchp:978-3-031-86354-7_13

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DOI: 10.1007/978-3-031-86354-7_13

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