| Title: | Reduction of the mean hedging transaction costs |
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| Authors: | ID Mastinšek, Miklavž (Author) |
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| Files: |  Nase_gospodarstvo_2015_Mastinsek_Reduction_of_the_Mean_Hedging_Transaction_Costs_Redukcija_povprecnih_transakcijskih_stroskov_hedging_t.pdf (662,21 KB)
MD5: 161BC56CC1E21A0B02AD05BE303E1090
 http://www.degruyter.com/view/j/ngoe.2015.61.issue-5/ngoe-2015-0019/ngoe-2015-0019.xml
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| Language: | English |
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| Work type: | Scientific work |
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| Typology: | 1.01 - Original Scientific Article |
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| Organization: | EPF - Faculty of Business and Economics
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| Abstract: | Transaction costs of derivative hedging appear in financial markets. This paper considers the problem of delta hedging and the reduction of expected proportional transaction costs. In the literature the expected approximate proportional transaction costs are customarily estimated by the gamma term, usually the largest term of the associated series expansion. However, when options are to expire in a month or few weeks, other terms may become even larger so that more precise estimates are needed. In this paper, different higher-order estimates of proportional transaction costs are analyzed. The problem of the reduction of expected transaction costs is considered. As a result, a suitably adjusted delta is given, for which the expected approximate proportional transaction costs can be reduced. The order of the mean and the variance of the hedging error can be preserved. Several examples are provided. |
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| Keywords: | derivatives, delta hedging, transaction costs, hedging error |
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| Publication status: | Published |
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| Publication version: | Version of Record |
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| Year of publishing: | 2015 |
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| Number of pages: | str. 23-31 |
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| Numbering: | Letn. 61, št. 5 |
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| PID: | 20.500.12556/DKUM-65377  |
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| ISSN: | 0547-3101 |
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| UDC: | 336.76:330.43 |
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| ISSN on article: | 0547-3101 |
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| COBISS.SI-ID: | 12124700 |
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| DOI: | 10.1515/ngoe-2015-0019 |
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| NUK URN: | URN:SI:UM:DK:AZKP18GI |
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| Publication date in DKUM: | 03.04.2017 |
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| Views: | 1414 |
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| Downloads: | 207 |
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| Metadata: |    |
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| Categories: | Misc.
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