Inverse Vertical Ratio Put Spread Strategy and its Application in Hedging Against a Price Drop

The paper proposes a generalization of a strategy known as the Long Two Buy One Ratio Put or Put Backspread Strategy. Moreover, it proposes an application of the strategy in hedging against a price drop of the underlying asset to a future date in a way which enables hedging with zero cost. We have found a profit function, as well as a function of income from a hedged position in the analytical form, which simplifies the application in particular hedging.

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Year of publication:	2010
Authors:	Šoltés, Vincent ; Amaitiek, Omer Faraj S.
Published in:	Journal of Advanced Studies in Finance. - ASERS Publishing. - Vol. I.2010, 1, p. 100-107
Publisher:	ASERS Publishing
Subject:	option strategy \| hedging \| price drop \| profit function \| premium zero cost

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Extent:	text/html
Type of publication:	Article
Classification:	G32 - Financing Policy; Capital and Ownership Structure ; G11 - Portfolio Choice ; G13 - Contingent Pricing; Futures Pricing
Source:	RePEc - Research Papers in Economics

Persistent link: https://www.econbiz.de/10008670475