1. Financial Information Management Portfolio-level Delta Hedging Stefano Grazioli

2. Critical Thinking  Overall good  Easy meter

3. The Hedge Tournament  Questions?  Teams?

4. Financial Information Management Delta Hedging With a portfolio of related securities

5. Delta of a Portfolio  We have seen the 1:1 approach to Delta Hedging  What if I have more than one type of derivative with the same underlier in my portfolio?  Delta hedging still applies... and it can be made even better!

6. Delta of a Family Portfolio

7. Delta Neutral Portfolio  Perfectly hedged portfolio has Delta = 0  This means that the sum of the values of the positions that relate to a specific stock (long, short, call, put) does not change as the stock price changes.

8. Delta of a Portfolio of Related Securities Assume that the underlier is Google  portfolio =  qty i *  i 1000 * 0.53 – 2000 * 0.46 – 500 * (-0.51) = -135 -135 + 135 = 0 long call short call (different strike) short put Initial Delta Delta that is necessary to make the portfolio delta neutral Delta for the portfolio

9. Key Portfolio Decision  I need +135 delta on my GOOG portfolio, how do I get it? Buy stocks Buy calls (delta > 0) Sell puts (delta < 0) SellShort puts  Pros/cons: cash, horizon, cost, tc, stability

10. Example Delta for the portfolio of GOOGLE positions: +2,420

11. Your Opinion Matters  A couple of things that you have learned from the class  Is the class getting you to think on your own  What can be improved  Attitude towards the HT

12. Financial Information Management WINIT What Is New In Technology?

13. Financial Information Management Homework Spartan Trader