Hedging Greeks for a portfolio of options using linear and quadratic programming

Pankaj Sinha and Archit Johar

MPRA Paper from University Library of Munich, Germany

Abstract: The aim of this paper is to develop a hedging methodology for making a portfolio of options delta, vega and gamma neutral by taking positions in other available options, and simultaneously minimizing the net premium to be paid for the hedging. A quadratic programming solution for the problem is formulated, and then it is approximated to a linear programming solution. A prototype for the linear programming solution has been developed in MS Excel using VBA.

Keywords: Hedging; Greeks; portfolio of options (search for similar items in EconPapers)
JEL-codes: C00 C02 C10 C44 C61 C63 C88 G00 G11 (search for similar items in EconPapers)
Date: 2010-02-15
New Economics Papers: this item is included in nep-ore
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Citations: View citations in EconPapers (3)

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Related works:
Journal Article: Hedging Greeks for a Portfolio of Options Using Linear and Quadratic Programming (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:20834

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