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Please use this identifier to cite or link to this item: https://hdl.handle.net/2445/198331
Hedging at-the-money digital options near maturity
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Hedging at-the-money digital options near maturity, remains a challenge in quantitative finance. In the present work, we carry out a hedging strategy by means of a bull spread. We study the probability of super- and sub-hedge the digital option and minimize the probability of a sub-hedge considering the cost of hedging and illiquidity issues. We perform a wide variety of numerical experiments under different models for the underlying asset dynamics. A calibration to market data is provided and used to get the optimal composition of the bull spread satisfying the cost of hedging restriction (...)
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BLANC-BLOCQUEL, Augusto, ORTIZ GRACIA, Luis and OVIEDO, Rodolfo J. Hedging at-the-money digital options near maturity. Methodology and Computing in Applied Probability . 2023. Vol. 25, num. 18, pags. 1-18. ISSN 1387-5841. [consulted: 10 of October of 2026]. Available at: https://hdl.handle.net/2445/198331