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Published byCasey Bragg Modified over 2 years ago

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Hedging with Black and scholes Analytical Finance I Ellen Bjarnadóttir, Helga Daníelsdóttir and Koorosh Feizi

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Introduction Our assignment Tools used to solve the problem Monta Carlo simulation Geometric Brownian motion (GBM) Black-Scholes model Delta hedge

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Monte Carlo simulation Model that gives you possible result using random variables Calculating probabilty of random outcomes

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Black and Scholes

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Geometric Brownian Motion

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Delta Hedge Changes in option price with respect to underlying stock price Reduces risk

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Methodology Specify a model GBM Black & Scholes Parameters S, K, r, σ, T Generate random trials Process the output/results Stock Price Call Price – 15,07 Portfolio Value Rebalance – 9 times

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Stock Price at maturity

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Conclusion Summary Interpretation of our result Improvements

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