Carteiras de Opções: Avaliação de Metodologias de Exigência de Capital no Mercado Brasileiro

Claudio Barbedo and Gustavo Araujo

No 82, Working Papers Series from Central Bank of Brazil, Research Department

Abstract: The importance of risk management has been highlighted by the series of disasters related to the application of derivatives and by the common sense in needing to cover these operations with capital allocation. However, not much agreement exists concerning the methods for calculating the capital required for covering the potential losses of these assets. Options are derivatives that are still more complex, mainly if they are fitted into a portfolio, because they have many risk factors and they have a non-linear dependence on the underlying asset. The objective of this article is to analyze methods for calculating capital requirement of stock option portfolios in the Brazilian market. Seven methodologies are evaluated, according to the rules indicated by the Basle Committee, one standardized method and the others based on value at risk.

Date: 2004-03
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