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DER 08 Managing risk passively

Passive option strategies are ones that are opened today and held to expiration. The expected returns/risks of these strategies can be computed straightforwardly using Monte Carlo simulation.

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• Required reading

  • HSBC Buffered return enhanced notes

  • Cboe FLEX options

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• Lecture notes

  • Slides

  • Supporting files​

    • Expected option profit using simulation.xlsx

    • HSBC Buffered enhanced note.xlsx

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NOTE: All of the above ideas and techniques can be applied without identifying the specific nature of the asset underlying the derivatives contract. They are generic. In what lies below, we discuss how the ideas and techniques are applied to derivatives contracts written on specific assets.

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