obpi: Option Based Portfolio Insurance (OBPI)

In sleire/etrm: Energy Trading and Risk Management

Option Based Portfolio Insurance (OBPI)

Description

Implements OBPI strategy for commodity price risk management

Usage

obpi(
  q,
  tdate,
  f,
  k = f[1],
  vol,
  r = 0,
  tdays = 250,
  daysleft,
  tcost = 0,
  int = TRUE
)

Arguments

q	numeric value for quantity to be hedged, either positive (net buyer) or negative (net seller)
tdate	date vector with trading days
f	numeric futures price vector
k	numeric value for option strike price
vol	value for volatility
r	value for interest rate
tdays	integer assumed number of trading days per year
daysleft	integer with days left to option expiry
tcost	numeric transaction costs pr unit
int	TRUE/ FALSE integer restriction on tradable volume

Value

instance of the OBPI class

Examples

# OBPI for a buyer (seller), where stop loss is set 10% above (below) initial market price.

set.seed(5)
# GBM price process parameters
mu <- 0.2
sigma <- 0.1
S0 <- 100

# time
Y <- 2
N <- 500
delta <- Y/N
t <- seq (0, 1, length = N + 1)

# price process and date vector
W <- c(0, cumsum ( sqrt(delta) * rnorm (N)))
f_gbm <- S0 * exp(mu * t + sigma * W)
tr_dates <- seq(Sys.Date(), Sys.Date()+500, by = "day")

#implement obpi strategy for buyer
obpi_b <- obpi(q = 10,
tdate = tr_dates,
f = f_gbm,
k = f_gbm[1],
vol = 0.2,
r =  0,
tdays = 250,
daysleft = length(f_gbm),
tcost = 0,
int = TRUE)

# implement obpi strategy for seller
obpi_s <- obpi(q = - 10,
tdate = tr_dates,
f = f_gbm,
k = f_gbm[1],
vol = 0.2,
r =  0,
tdays = 250,
daysleft = length(f_gbm),
tcost = 0,
int = TRUE)

sleire/etrm documentation built on Feb. 5, 2023, 9:02 a.m.