Abstract
| Original language | English |
|---|---|
| Pages (from-to) | 194-203 |
| Number of pages | 10 |
| Journal | Economic Modelling |
| Volume | 33 |
| DOIs | |
| Publication status | Published - Jul 2013 |
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Keywords
- option hedging
- operational risk
- risk distribution
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Operational risk of option hedging. / Mitra, Sovan.
In: Economic Modelling, Vol. 33, 07.2013, p. 194-203.Research output: Contribution to journal › Article
TY - JOUR
T1 - Operational risk of option hedging
AU - Mitra, Sovan
PY - 2013/7
Y1 - 2013/7
N2 - Operational risk is increasingly being recognised as a significant area of risk and regulation, yet there exists relatively little research on it. In this paper we show that operational risk represents a fundamental risk to option hedging and investigate it by proposing a new theoretical model. We derive an exposure indicator for the operational risk of option hedging and the resulting operational risk distribution. We obtain analytical results for various risk measures including the Value at Risk equation; this includes deriving a new analytical result for the quantile function of the half-normal distributions (which will be of interest to Statisticians in general).
AB - Operational risk is increasingly being recognised as a significant area of risk and regulation, yet there exists relatively little research on it. In this paper we show that operational risk represents a fundamental risk to option hedging and investigate it by proposing a new theoretical model. We derive an exposure indicator for the operational risk of option hedging and the resulting operational risk distribution. We obtain analytical results for various risk measures including the Value at Risk equation; this includes deriving a new analytical result for the quantile function of the half-normal distributions (which will be of interest to Statisticians in general).
KW - option hedging
KW - operational risk
KW - risk distribution
U2 - 10.1016/j.econmod.2013.04.031
DO - 10.1016/j.econmod.2013.04.031
M3 - Article
VL - 33
SP - 194
EP - 203
JO - Economic Modelling
JF - Economic Modelling
SN - 0264-9993
ER -