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DER 07 Managing risk dynamically

With the ability to measure risk, we create the ability to manage risk through time.

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• Required reading

  • Whaley, 2006, Ch. 10, Risk management strategies: Options (pp. 347-362)

  • Saletta 20210128 What is a gamma squeeze? The Motley Fool.

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• Lecture notes

  • Slides

  • Supporting files​

    • ABC market maker.xlsx

    • S&P 500 market maker.xlsx

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EARNING EMBEDDED CONTRACT FEES

The terms of OTC contracts are often written in such a way that there is no obvious cost. The fees charged by the dealer are embedded. The embedded fees can be deduced using techniques such as Monte Carlo simulation.

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• Required reading

  • WSJ Ted Turner costless collar

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• Lecture notes

  • Slides

  • Supporting files​

    • Ted Turner collar valuation.xlsx

    • Earning embedded fee dynamically.xlsx

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