Managing Derivative Exposure
Portfolio Management
2010-04-08 v1 Risk Management
Abstract
We present an approach to derivative exposure management based on subjective and implied probabilities. We suggest to maximize the valuation difference subject to risk constraints and propose a class of risk measures derived from the subjective distribution. We illustrate this process with specific examples for the two and three dimensional case. In these cases the optimization can be performed graphically.
Keywords
Cite
@article{arxiv.1004.1053,
title = {Managing Derivative Exposure},
author = {Ulrich Kirchner},
journal= {arXiv preprint arXiv:1004.1053},
year = {2010}
}
Comments
8 pages, 5 figures