This is a summary of links featured on Quantocracy on Friday, 05/08/2020. To see our most recent links, visit the Quant Mashup. Read on readers!
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How to Hedge a Portfolio with Put Options [Robot Wealth]There are 2 good reasons to buy put options: because you think they are cheap because you want downside protection. In the latter case, you are looking to use the skewed payoff profile of the put option to protect a portfolio against large downside moves without capping your upside too much. The first requires a pricing model. Or, at the least, an understanding of when and under what conditions
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Machined risk premia [OSM]Over the last few posts, weve discussed methods to set return expectations to construct a satisfactory portfolio. These methods are historical averages, discounted cash flow models, and risk premia. our last post, focused on the third method: risk premia. Using the Capital Asset Pricing Model (CAPM) one can derive the required return for a particular asset based on the market price of risk, the