Risk Management: Equity Derivatives in Practice

Review of Self-Financing Trading Strategy A self-financing trading strategy is a trading strategy θt = (xt, yt) where changes in Vt are due entirely to trading gains or losses, rather than the addition or withdrawal of cash funds. Why do we care? Dynamic Replication: in the multi-period binomial model, we can actually construct a self-financing … Continue reading Risk Management: Equity Derivatives in Practice