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Hedge Simulator: Hedging in discrete time

Java Applet

Alternatively you may launch this applet using Java WebStart. Minimum requirements: Java 1.6. Tested with Firefox and Safari. Source code for the underlying library is available at finmath.net.

IMPORTANT: The applet is currently self-signed. Hence it will no longer run under the Java security level "high", which has become default. In order to run the applet, you need to add the domain http://christian-fries.de to the Exception Site List. To edit the Exception Site List open the Java control panel, select the Security tab, then press Edit Site List.

Description

This page illustrates that imperfect hedging induces deviation of the (terminal) value of the hedge portfolio from the option payoff. For hedging in discrete time the hedge minimizing the residual error is different from the delta hedge.

It serves as a companion to Chapter 7 of Mathematical Finance.

Predefined Scenarios

You may step through some predefined scenarios. (Currently not available)

© Copyright 2007,2013 Christian P. Fries