Performance of Delta-Neutral Hedging Strategy on Moderna Inc Stock

Beibei Liu

2022

Abstract

This paper investigates the effectiveness of delta-neutral hedging strategy. The goal of this paper is to hedge an option contract on Moderna Inc stock. The result of this paper is useful for investors, especially beginners, to use as a reference when building a portfolio. This study is divided into two parts. The first one is to calibrate volatility of stock using three different models: the Black-Scholes model, binomial tree model, and historical return model. With implied volatility in hand, a delta-neutral portfolio is built to hedge a put option on Moderna Inc stock. The performance of the hedging strategy can be observed by comparing portfolio return with the return of the option contract alone. The result of this study indicates that delta-neutral hedging strategy does reduce loss in investment. Such result is beneficial for individual investors in formulating a simple portfolio.

Paper Citation

in Harvard Style

Liu B. (2022). Performance of Delta-Neutral Hedging Strategy on Moderna Inc Stock. In Proceedings of the 4th International Conference on Economic Management and Model Engineering - Volume 1: ICEMME; ISBN 978-989-758-636-1, SciTePress, pages 412-416. DOI: 10.5220/0012033900003620

in Bibtex Style

@conference{icemme22,
author={Beibei Liu},
title={Performance of Delta-Neutral Hedging Strategy on Moderna Inc Stock},
booktitle={Proceedings of the 4th International Conference on Economic Management and Model Engineering - Volume 1: ICEMME},
year={2022},
pages={412-416},
publisher={SciTePress},
organization={INSTICC},
doi={10.5220/0012033900003620},
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 - Performance of Delta-Neutral Hedging Strategy on Moderna Inc Stock
SN - 978-989-758-636-1
AU - Liu B.
PY - 2022
SP - 412
EP - 416
DO - 10.5220/0012033900003620
PB - SciTePress