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dc.contributor.authorLin, Chang-Chunen_US
dc.contributor.authorLiu, Yi-Tingen_US
dc.contributor.authorChen, An-Pinen_US
dc.description.abstractOptions are designed to hedge against risks to their underlying assets such as stocks. One method of forming option-hedging portfolios is using stochastic programming models. Stochastic programming models depend heavily on scenario generation, a challenging task. Another method is neutralizing the Greek risks derived from the Black-Scholes formula for pricing options. The formula expresses the option price as a function of the stock price, strike price, volatility, risk-free interest rate, and time to maturity. Greek risks are the derivatives of the option price with respect to these variables. Hedging Greek risks requires no human intervention for generating scenarios. Linear programming models have been proposed for constructing option portfolios with neutralized risks and maximized investment profit. However, problems with these models exist. First, feasible solutions that can perfectly neutralize the Greek risks might not exist. Second, models that involve multiple assets and their derivatives were incorrectly formulated. Finally, these models lack practicability because they consider no minimum transaction lots. Considering minimum transaction lots can exacerbate the infeasibility problem. These problems must be resolved before option hedging models can be applied further. This study presents a revised linear programming model for option portfolios with multiple underlying assets, and extends the model by incorporating it with a fuzzy goal programming method for considering minimum transaction lots. Numerical examples show that current models failed to obtain feasible solutions when minimum transaction lots were considered. By contrast, while the proposed model solved the problems efficiently. (C) 2016 Elsevier B.V. All rights reserved.en_US
dc.subjectOption portfolioen_US
dc.subjectGreek risksen_US
dc.subjectMinimum transaction lotsen_US
dc.subjectFuzzy goal programmingen_US
dc.titleHedging an option portfolio with minimum transaction lots: A fuzzy goal programming problemen_US
dc.identifier.journalAPPLIED SOFT COMPUTINGen_US
dc.contributor.department資訊管理與財務金融系 註:原資管所+財金所zh_TW
dc.contributor.departmentDepartment of Information Management and Financeen_US
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