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Essay heading: hedge portfolio
Essay specific features
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Business |
| Written by: |
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| Date added: |
May 4, 1998 |
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5 / 1170 |
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0 times |
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Essay content:
A positive alpha does mean that EBay Inc. has outperformed the market.
However for EBay Inc. an alpha of 12.74% over the 14 week period is quite enormous. It shows that there were some events like acquisitions and new developments2 over the past 14 weeks that led to an excess return of 12.74%.
OPTION AND STOCK HEDGE:
The original objective in finding the hedge ratios is to find the approximate number of call options to sell in order to hedge the long stock position...
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The basic objective is to eliminate risk of price going down.
Here I own 25,686 shares of EBay stock. The delta N(d1) initially was 0.455. Hence I sold 25,686/ 0.455 = 56,453 calls to hedge a long 25,686 stock position and to keep the delta of 0.
?? = 25686 ??stock - 56453??calls
= 25686 (1.00) ?V 56453 (...
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