Annals of Operations Research

, Volume 206, Issue 1, pp 557–576 | Cite as

Options strategies for international portfolios with overall risk management via multi-stage stochastic programming

Article

Abstract

This paper proposes a multi-stage stochastic programming model to explore optimal options strategies for international portfolios with overall risk management on Greek letters, extending existing Greek-based analysis to dynamic and nondeterministic programming under uncertainty. The contribution to the existing literature are overall control on the time-varying Greek letters, state-contingent decision dynamics in consistent with the projected outcomes of the changing information, and a holistic view for optimizing the portfolio of assets and options. Empirical results show the model possesses considerable benefits in terms of larger profit margins, greater stability of returns and higher hedging efficiency compared to traditional methods.

Keywords

Options strategies Risk management Multi-stage stochastic programming Greek letters 

Notes

Acknowledgements

The authors would like to thank the National Natural Science Foundation of China for financial support with projects No. 70831001 and 71173008.

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Copyright information

© Springer Science+Business Media New York 2013

Authors and Affiliations

  1. 1.School of Economics and ManagementBeihang UniversityBeijingChina

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