Hedging valuation adjustment: fact and friction

Transaction costs’ impact on hedging can now be quantified

CLICK HERE TO VIEW THE PDF

Benedict Burnett develops a simple and generic expression for the impact of transaction costs on the value of a derivative portfolio, expressed as a ‘hedging valuation adjustment’ (HVA). This HVA expression is provided for both hedged and unhedged cases, with the hedged case manifesting an ‘imaginary volatility’ effect in certain cases

The problem of real-world hedging has troubled option theory since its earliest days: a trader cannot realistically hedge their

Only users who have a paid subscription or are part of a corporate subscription are able to print or copy content.

To access these options, along with all other subscription benefits, please contact info@risk.net or view our subscription options here: http://subscriptions.risk.net/subscribe

You are currently unable to copy this content. Please contact info@risk.net to find out more.

To continue reading...

You need to sign in to use this feature. If you don’t have a Risk.net account, please register for a trial.

Sign in
You are currently on corporate access.

To use this feature you will need an individual account. If you have one already please sign in.

Sign in.

Alternatively you can request an individual account here: