How often rebalance delta-hedged portfolios?



Rok publikování 2015
Druh Článek ve sborníku
Konference 7th International Conference Economic Challanges in Enlarged Europe
Fakulta / Pracoviště MU

Ekonomicko-správní fakulta

Obor Řízení, správa a administrativa
Klíčová slova warrants; delta-hedging; portfolio; Frankfurt Stock Exchange; transaction costs
Popis The aim of this paper is to show how delta-hedging in relation to portfolio rebalancing works on real financial markets with an emphasis on situation on European stock exchanges. The motivation for this research is to gain knowledge for investing in real markets more effectively than just by using theoretical methods. In previous research we have found out that during the process of delta-hedging with no rebalancing 70 percent of risk may be avoided when we omit transaction costs; in current research we achieved other interesting results under the terms of transaction costs and different frequency of rebalancing which were added to the model. We constructed 30 portfolios consisting of American style plain vanilla call warrants and correspondent amount of underlying shares. We compared one week and two weeks period of rebalancing with no rebalancing.
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