Faculty of Economics and Business Administration Publications Database

Risk Value Analysis of Covered Short Call and Protective Put Portfolio Strategies

Adam, Michael
Volume: 13
Number: 4
Pages: 431 - 449
ISSN-Print: 1555-4961
Link External Source: Online Version
Year: 1999
Abstract: The purpose of this paper is to evaluate two popular option strategies, the protective put and the covered short call, in the context of different risk-value-models. The risk measures considered are: maximum possible loss, volatility, skewness and lower partial moments. Assuming logarithmic normally distributed stock prices and BLACK/SCHOLES option prices, we compare in a case study analysis the hedging effectiveness of both option strategies to different excercise prices and different hedge ratios.