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Trend derivatives: pricing, hedging, and application to executive stock options - Zurich Open Repository and Archive


Syz, Jürg; Leippold, Markus (2007). Trend derivatives: pricing, hedging, and application to executive stock options. Journal of Futures Markets, 27(2):151-186.

Abstract

Both institutional and private investors often have only limited flexibility in timing their investment decision. They look for investments that will ideally be independent of the timing decision. In this article, a new class of derivative products whose payoff is linked to the trend of the underlying instrument is introduced. By linking the trend to the payoff, the timing of the decision becomes less important. Therefore, trend derivatives offer some time-diversification benefits. How trend derivatives are designed and priced is shown. Due to their peculiar features, trend derivatives offer some interesting applications such as executive stock option plans.

Abstract

Both institutional and private investors often have only limited flexibility in timing their investment decision. They look for investments that will ideally be independent of the timing decision. In this article, a new class of derivative products whose payoff is linked to the trend of the underlying instrument is introduced. By linking the trend to the payoff, the timing of the decision becomes less important. Therefore, trend derivatives offer some time-diversification benefits. How trend derivatives are designed and priced is shown. Due to their peculiar features, trend derivatives offer some interesting applications such as executive stock option plans.

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Additional indexing

Item Type:Journal Article, refereed, original work
Communities & Collections:03 Faculty of Economics > Department of Banking and Finance
Dewey Decimal Classification:330 Economics
Language:English
Date:February 2007
Deposited On:30 Jul 2014 07:31
Last Modified:08 Feb 2017 04:10
Publisher:Wiley-Blackwell Publishing, Inc.
ISSN:0270-7314
Publisher DOI:https://doi.org/10.1002/fut.20233
Official URL:http://onlinelibrary.wiley.com/doi/10.1002/fut.20233/abstract
Other Identification Number:merlin-id:3454

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