Hedging Conditional Value at Risk with Options
Maciej J. Capi\'nski
TL;DR
This paper introduces a linear programming approach to hedge the Conditional Value at Risk of stock positions using put options, optimizing risk management strategies.
Contribution
It proposes a novel linear programming framework for CVaR hedging with options, enhancing risk control methods.
Findings
Effective CVaR hedging via put options demonstrated.
Linear programming approach optimizes risk reduction.
Method applicable to various stock positions.
Abstract
We present a method of hedging Conditional Value at Risk of a position in stock using put options. The result leads to a linear programming problem that can be solved to optimise risk hedging.
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