Option Arbitrage And Its Hedging Strategy

Option is a kind of non-linear derivative financial instrument,the rapid development of China's options market,the importance of financial risk management has become increasingly prominent,the investment of options and risk management research increasingly necessary.Option volatility arbitrage is to fill the market unreasonable pricing process.In the comparative study of different option values,the volatility is usually used to replace the price.The deviation of the volatility can be filled by the volatility arbitrage transaction.In the volatility arbitrage,the risk index of the option is the Greek value worthy of attention.Based on the Greek value,Rate of arbitrage risk management.This paper argues that the implied volatility of the option value is the option value reflected by the option market price.Based on the study of volatility,arbitrage opportunities arise when the volatility deviates from the theoretical value(parity formula or statistical forecast).Volatility parity arbitrage principle is bullish,put option parity formula;statistical arbitrage principle is the volatility mean return.Volatility is a risk-free transaction,only according to the replication strategy,according to the bullish put option to copy the futures principle,the use of spot hedging;volatility statistics arbitrage is a risk trading,according to the Greek value of the neutral hedge.Delta,Gamma,Vega,Theta,Rho play a crucial role in option hedge and risk management.For Delta hedging strategies,fixed time interval hedges and Whalley-Wilmott hedge hedging is the most common way;hedge Gamma risk target should be chosen near the flat value,moderate maturity and no arbitrage space options.According to the data of volatility parity arbitrage and volatility statistic arbitrage,the empirical results show that,in terms of volatility parity arbitrage transaction,the transaction cost is not taken into account by the relevant data of the SSE 50ETF option in December 2016 to March 2017,The greater the difference between the implied volatility and the theoretical volatility,the greater the yield of the parity arbitrage;when the arbitrage returns are more than the transaction cost,the higher the difference between the volatility and the theoretical volatility,You can get positive returns.In terms of volatility statistic arbitrage,the EGARCH(1,1)-t model has a good fitting effect on the SSE 50ETF sequence.In terms of arbitrage opportunities,the implied volatility is higher than the actual volatility,and the implied volatility of the vast majority of contracts is higher than the theoretical volatility(forecast),There is the arbitrage space for the put option(reverse arbitrage).By comparing the arbitrage results of the different closing conditions,it is shown that the profit taking back to the open position can be reduced and the retracement(net worth)is reduced;the overall return on volatility is the highest;the implied The volatility will tend to infinity,so that can not control,expiration liquidation strategy will be invalid.Hedge strategy,the fixed time interval hedge,the higher the frequency of hedging,the better the hedging effect;in the ups and downs of the volatility of the situation,the WW hedge hedge strategy will increase the frequency of hedging to enhance the hedging effect,but in the In addition,the Gamma risk hedge selection has a great impact on the hedging effect,and if the Gamma value is chosen to be very high,the risk of the Gamma risk is very high,In the case of hedges that are small(depth real or virtual,or far from the expiration date,the Gamma value is close to 0),the result of the hedging effect is uncontrollable and the combination is destroyed.Gamma risk hedge the choice of maturity date between 30 days to 60 days,the level of 5%or less,and there is no arbitrage space options,there will be a better hedge effect.