Option Pricing and Risk Hedging by Black-Scholes Model and Cox-Ross-Rubinstein Model for Unilever PLC

Sen Chen, Boyang Sun, Jingzhe Lin

2022

Abstract

Currently, option pricing and risk hedging are interesting topics in the financial field within the violate world. This paper studies the performance of the different hedging strategies on options on stocks of Unilever PLC within the Fast-Moving Consumer Goods Industry, which is helpful for both individual and institutional investors to build their portfolios and choose a hedging strategy. In this study, implied volatility for each of Unilever’s stocks is calibrated utilizing data on ten options on that stock. Then, with the Black Scholes Model and Cox-Ross-Rubinstein model calculated, a hedging portfolio is composed, containing one unit of a specific option and delta shares of the underlying stock for the company. Finally, the hedging performances of the options on the company’s stocks are compared. The results in this paper benefit both individual and institutional investors in choosing the best-fit hedging strategy depending on the nature of the underlying asset to risk mitigation.

Paper Citation

in Harvard Style

Chen S., Sun B. and Lin J. (2022). Option Pricing and Risk Hedging by Black-Scholes Model and Cox-Ross-Rubinstein Model for Unilever PLC. In Proceedings of the 4th International Conference on Economic Management and Model Engineering - Volume 1: ICEMME; ISBN 978-989-758-636-1, SciTePress, pages 387-394. DOI: 10.5220/0012033500003620

in Bibtex Style

@conference{icemme22,
author={Sen Chen and Boyang Sun and Jingzhe Lin},
title={Option Pricing and Risk Hedging by Black-Scholes Model and Cox-Ross-Rubinstein Model for Unilever PLC},
booktitle={Proceedings of the 4th International Conference on Economic Management and Model Engineering - Volume 1: ICEMME},
year={2022},
pages={387-394},
publisher={SciTePress},
organization={INSTICC},
doi={10.5220/0012033500003620},
isbn={978-989-758-636-1},
}

in EndNote Style

TY - CONF

JO - Proceedings of the 4th International Conference on Economic Management and Model Engineering - Volume 1: ICEMME
TI - Option Pricing and Risk Hedging by Black-Scholes Model and Cox-Ross-Rubinstein Model for Unilever PLC
SN - 978-989-758-636-1
AU - Chen S.
AU - Sun B.
AU - Lin J.
PY - 2022
SP - 387
EP - 394
DO - 10.5220/0012033500003620
PB - SciTePress