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java.lang.Object TradingStrategies.VectorStrategy TradingStrategies.VectorStrategyDeltaHedging
The trading strategy which trades in the underlying to hedge a short position in one option on one share of the underlying using one of the following weights:
computed under one of the two following probabilities:
The hedge is rebalanced whenever the Trigger rebalance triggers a hedge trade. The hedge is checked against price paths of the underlying simulated under the market probability.
At each trade nonanalytic hedge weights are derived from conditional expectations which can be computed under the market or the risk neutral probability.
The flags whichDelta, whichProbability
indicate which type
of deltas are used in the hedge and under which probability they are
computed.
Conditional expectations which are computed via branching the price paths of the underlying asset are computationally costly. Therefore analytic deltas are by orders of magnitude faster than the others. Minimum variance deltas computed under the market probability (the best hedge deltas) carry an astronomical computational cost if there is no analytic option price formula (iterated conditional expectations).
Constructor Summary  
VectorStrategyDeltaHedging(Basket underlying,
BasketOption option,
Trigger rebalance,
int whichDelta,
int nBranch,
double fixed_trc,
double prop_trc)
Constructor. 
Method Summary  
int 
get_nBranch()
Number of path branches used in conditional expectations (hedge deltas). 
BasketOption 
get_option()
The option to be hedged. 
int 
get_whichDelta()
Type of delta used in hedge 
void 
setNewWeight(int t)
Writes the vector of portfolio weights at time t into the field newWeight . 
Methods inherited from class TradingStrategies.VectorStrategy 
discountedGainsAndNumberOfTrades, discountedGainsFromTrading, get_B, get_basket, get_currentWeight, get_dt, get_fixed_trc, get_nTrades, get_prop_trc, get_S, get_T, get_tradeTrigger, initialInvestment, newDiscountedGainsAndNumberOfTrades, newDiscountedGainsFromTrading, newReturnFromTrading, newTradeStatistics, returnsFromTrading, tradeStatistics 
Methods inherited from class java.lang.Object 
clone, equals, finalize, getClass, hashCode, notify, notifyAll, toString, wait, wait, wait 
Constructor Detail 
public VectorStrategyDeltaHedging(Basket underlying, BasketOption option, Trigger rebalance, int whichDelta, int nBranch, double fixed_trc, double prop_trc)
underlying
 asset underlying the option.option
 option to be hedged.rebalance
 trigger triggering the hedge trades.whichDelta
 flag identifying type of hedge delta used.nBranch
 number of asset price path branches spent on each
conditional expectation.fixed_trc
 fixed transaction costs per trade.prop_trc
 proportional transaction costs per trade.Method Detail 
public BasketOption get_option()
public int get_whichDelta()
public int get_nBranch()
public void setNewWeight(int t)
Writes the vector of portfolio weights at time t into the field
newWeight
. Do this whenever a trade (portfolio rebalancing)
occurs. The field currentWeight
contains the current
vector of portfolio weights.
setNewWeight
in class VectorStrategy
t
 current time.


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