Abstract
Options are widely used as a tool for investment and risk management. In a liquid market, investors have the flexibility to trade options prior to their expiration dates. This is especially important for investors with an existing option position as they can control risk exposure through timing the option trades. For effective option based portfolio management, it is imperative for any investor to determine when to liquidate an option to the market at its trading price. Prior to expiration, the investor can always sell the option immediately, or wait for a potentially better future opportunity. This chapter studies the optimal timing to liquidate an option position to the market.
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© 2013 Tim Leung and Peng Liu
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Leung, T., Liu, P. (2013). An Optimal Timing Approach to Option Portfolio Risk Management. In: Batten, J.A., MacKay, P., Wagner, N. (eds) Advances in Financial Risk Management. Palgrave Macmillan, London. https://doi.org/10.1057/9781137025098_17
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DOI: https://doi.org/10.1057/9781137025098_17
Publisher Name: Palgrave Macmillan, London
Print ISBN: 978-1-349-43874-7
Online ISBN: 978-1-137-02509-8
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