Double barrier options provide risk managers with good-deal flexibility in tailoring portfolio returns.Their hedges offer full protection only if unwound along the barriers.This work provides non-dynamic hedges that project the risk of double barriers on to single barriers.Non-dynamic hedges overcome bulky transaction costs due to dynamic hedging trades.That projection implies that two single barriers written on the double barrier corridor extrema are often a comfortable, even if imperfect, hedge.Such a hedge is simple and gives automatic protection along the barriers.Automatic protection overcomes trading issues along the barriers.
Original language | English |
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Place of Publication | Tilburg |
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Publisher | Finance |
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Number of pages | 36 |
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Volume | 2000-112 |
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Publication status | Published - 2000 |
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Name | CentER Discussion Paper |
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Volume | 2000-112 |
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