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kimisiow83


Total Posts: 2
Joined: May 2017
 
Posted: 2017-07-28 07:36
Hi pros in nuclearphynance,

As per subjects, I hope that there are pro here to guide and advise me on this problem.

Scenario:

I underwrite a down and in put option (Which mean I sold the option) in an immature market. This means I does not have vanilla option to hedge this barrier. Which means, I can only hedge with cash and underlying.

What should I do in this kind of situation. In normal vanilla option, we can use BS to find our Greeks for Delta hedge. But what is the best way or model to find Delta for Barrier options?

Anyone can guide or advise on my situation? Thanks in advance. Really appreciate it.

ronin


Total Posts: 203
Joined: May 2006
 
Posted: 2017-07-28 11:05
Forget it.

Before you start googling barrier option deltas: to hedge a short put you have to short the underlying.

The sort of underlying that you described is usually prohibitively expensive to short, if it is even possible.



"People say nothing's impossible, but I do nothing every day" --Winnie The Pooh

kimisiow83


Total Posts: 2
Joined: May 2017
 
Posted: 2017-07-28 11:18
Thanks for your advice. I did a mistake actually. I am actually buyer of Down and In put. Which means I can only buy underlying and only underlying without vanilla option.

ronin


Total Posts: 203
Joined: May 2006
 
Posted: 2017-07-28 14:44
OK.

So I would suggest that you use the "Basics" and "University" sections of the forum to find people who want to form a study group so you can go through this and other problems with them.

I could give you a messy, real-world answer to a messy, real world problem. But that wouldn't help you one bit.

"People say nothing's impossible, but I do nothing every day" --Winnie The Pooh
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