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Leveraged Exchange-traded Funds : Price Dynamics and Options Valuation (Paperback) (Tim Leung & Marco

Leveraged Exchange-traded Funds : Price Dynamics and Options Valuation (Paperback) (Tim Leung & Marco - image 1 of 1

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This Brief provides an analysis, under both discrete-time and continuous-time frameworks, on the price dynamics of leveraged exchange-traded funds (LETFs), with emphasis on the roles of leverage ratio, realized volatility, investment horizon, and tracking errors. This study provides new insights on the risks associated with LETFs, and leads to the discussion of trading strategies, including pairs trading and stop-loss strategies, with mathematical justification and formulas, along with a host of examples using empirical data. The final part of the Brief addresses the pricing of options written on LETFs. Since different LETFs are designed to track the same reference index, these funds and their associated options share very similar sources of randomness. The authors provide a no-arbitrage pricing approach that consistently value options on LETFs with different leverage ratios with stochastic volatility and jumps in the reference index. Their results are useful for market making of these options, and for identifying price discrepancies across the LETF options markets. 
Genre: Mathematics, Business + Money Management
Sub-Genre: Applied, Economics / Macroeconomics
Series Title: Springerbriefs in Quantitative Finance
Format: Paperback
Publisher: Springer Verlag
Author: Tim Leung & Marco Santoli
Language: English
Street Date: March 8, 2016
TCIN: 51157301
UPC: 9783319290928
Item Number (DPCI): 248-16-8463

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