Analysis Of Replication And Dynamic Hedging OTC Options

OTC option is also called OTC option, referred to as OTC, it is a non-standardized financial options contracts trading in non-centralized places, which the main difference with the exchange options in the option contract is standardized performance through to meet different risk preferences of investors in the period, liquidity, investment style, market sentiment, and many other specialized needs.It can be said that 2015 is the first year of options market in our country, on February 9, the first stock options products traded on the Shanghai stock exchange, but in the domestic commodity options exchanges has not yet officially launched that OTC options trading is more accepted by businesses, leveraged transactions help business entities to avoid market risk, increase company profits, and initiative management risk.OTC options on the design side, how effective hedging option positions exposure risk, particularly in terms of the put side, is worth focusing on. Because the trading venue options of a single species, the risk of hedging OTC options currently industry generally takes the method is by calculating the Delta, then using linear asset to dynamic hedge. Through practical case, first, pricing the corn futures options, and then to hedge the risk, mainly analyzed from the sell side of put option and the buy side of call option, using fixed point hedging and hedging fixed interval of two strategies, compare the effect of those two strategies. Finally, draw a conclusion that hedged with fixed interval hedge effect is obviously superior to the fixed point hedge.Obviously, promotion of options, not only can improve the ability of traders active disperse market risks, but also the only way of multi-level capital market development. Overall, OTC options business flexibility to produce a service for corporate entities, and is the existing futures products cannot provide risk management tools.I believe that in the near future, with the option of the product gradually enriched and options will be accepted by more and more people.