Download This PaperConstructing Strangles Using Linear Tradeable Factors with Applications to Stress Markets
5 Pages Posted: 17 Apr 2020
Date Written: March 31, 2020
Abstract
Convexity is discussed in a discrete state setting incorporating tradeable risk factors or asset classes. The framework is particularly well suited for stress markets. Portfolio construction, factor return and risk analysis, and risk management are discussed. Due to the dislocation, tradeable factors can be used to construct attractive strangle profiles in each state while maximizing global convexity. The approach allows for a qualitative overlay of views about factor performance.
Keywords: hedge funds, portfolio construction, convexity, synthetic options, convexity
Suggested Citation: Suggested Citation
Mazaheri, Mohsen, Constructing Strangles Using Linear Tradeable Factors with Applications to Stress Markets (March 31, 2020). Available at SSRN: https://ssrn.com/abstract=3565482 or http://dx.doi.org/10.2139/ssrn.3565482
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