Publication details

Hedging of Portfolios and Transaction Costs

Authors

FLORIANOVÁ Hana DRÁB Tomáš

Year of publication 2016
Type Article in Proceedings
Conference European Financial Systems 2016. Proceedings of the 13th International Scientific Conference
MU Faculty or unit

Faculty of Economics and Administration

Citation
Web http://is.muni.cz/do/econ/sborniky/2016/EFS2016-Proceedings_final_September_19_final.pdf
Field Management and administrative
Keywords warrants; hedging; portfolio; transaction costs
Description The aim of this paper is to decide whether to rebalance hedged portfolios often to reduce risk or to rebalance them less often to lower transaction costs. In this paper we use delta-hedging for portfolios consisting of warrants and shares. We focus on how portfolio rebalancing works on real financial markets with an emphasis on situation on European stock exchanges. The motivation for this research is to gain knowledge for investing in real markets more effectively than just by using theoretical methods. In our research we achieved interesting results under the terms of transaction costs and different frequency of rebalancing portfolios. We constructed 30 portfolios consisting of American style plain vanilla call warrants and correspondent amount of underlying shares. We compared one week and two weeks period of rebalancing with no rebalancing. The results are that you pay more money on transaction costs to reduce one percent of risk as the rebalancing is more frequent.
Related projects:

You are running an old browser version. We recommend updating your browser to its latest version.

More info