Research Reports from the Department of Operations
Document Type
Report
Publication Date
6-1-1982
Abstract
The purpose of this article is to develop expressions for the mean vector and the variance-covariance matrix of returns for portfolios containing options when it is assumed that prices follow geometric Brownian Motion. Given these expressions it is possible to employ a conventional expected value-variance approach to portfolios containing options. The expressions developed also enable a beta value to be calculated for a call option which is to be held over an arbitrary time period. Computation of market risk expressions for partially hedged portfolios held over arbitrary time periods is possible.
Keywords
Operations research, Options (Finance)--Mathematical models, Portfolio management, Investments, Brownian motion processes, Risk management, Stochastic processes, Financial engineering, Hedging (Finance)
Publication Title
Technical Memorandums from the Department of Operations, School of Management, Case Western Reserve University
Issue
Technical memorandum no. 512
Rights
This work is in the public domain and may be freely downloaded for personal or academic use
Recommended Citation
Ritchken, Peter H.; Symes, Robin Scott; and Salkin, Harvey M., "Expected Values and the Variance Covariance Structure of Returns for Portfolios Containing Options" (1982). Research Reports from the Department of Operations. 199.
https://commons.case.edu/wsom-ops-reports/199