Value-at-Risk Theory and Practice

The first advanced book on value-at-risk

Chapter 1, Page 51
Exercise 15

Describe portfolios whose mapping functions might appear like those of the previous exercise.

 

Solution

Various answers are possible. Consider the following.

a. A short straddle—short a put and short a call, both on the same underlier, for the same maturity, same notional amount, and stuck at the same price.

b. Short a put option.

c. A cartwheel options spread.

 

 

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