How does traditional option hedging perform in the South African equity market?

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How does traditional option hedging perform in the South African equity market?

Mare, Eben
URI: http://hdl.handle.net/2263/13321
Date: 2009-12

Abstract:

Derivative securities are frequently priced within the Black-Scholes methodology. Theoretically this entails maintaining a hedge consisting of the underlying asset and cash which needs to be rebalanced continuously. In practice, traders would only rebalance such hedges on a discrete basis. We examine the effects of discrete rebalancing of derivative hedges written on the FTSE/JSE TOP40 index.

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