CH 9 VaR

Chapter 21
Value at Risk
relevant certification Financial Risk Management
(FRM)
Options, Futures, and Other Derivatives, 8th Edition,

Copyright © John C. Hull 2012 1
The Question Being Asked in VaR
“What loss level is such that we are X%
confident (confidence level) it will not be
exceeded in N (time dimension) business
days?”
e.g.,For a $100 million portfolio, 99%
confident that the loss will not exceed 10%
of the portfolio value or $10 million in 1
day.
1% chance that the loss will exceed 10%
99% probability that the value of the portfolio
isOptions,
above $90
Futures, and Other Derivatives, 8th Edition,
Normal distribution
m  1   ui2 
 
2v
exp 
 2v 

i 1   

Confidence level: a review
If u (random variable) follows a normal
distribution f(m,v) with mean m and variance
v (or standard deviation s)
Then z = u-m/s has a standard normal

distribution with mean equals 0
variance/standard deviation equals 1; this
feature permits a construction of N(x) table

Confidence level: a review
If prob (u < X) = 1%
Then X-m/s  2.33
X = m + (2.33)s
If the expected return = 0
Then X = -2.33s
Confidence level = 99%
Loss level = 2.33s

Confidence level: for Portfolio
Value P
Return: prob (uP < XP) = 1%
Then XP-mP/sP  2.33
XP = mP 2.33sP
If the expected return = 0
Then XP = -2.33sP
XP: change in portfolio value
mP: expected value of the portfolio
sP: standard deviation in portfolio value
Translate theFutures,
Options, issue to
and Other dollar
Derivatives,
Copyright © John C. Hull 2012
figure
8th Edition,
6
Example
The dollar return of a portfolio after 6 month is
normally distributed with mean $2 million and
standard deviation $10 million
There is a 1% chance that the loss will
amount to at least 2−2.33×10 or − $21.3
million
VaR for the portfolio with a 6 month time
horizon and a 99% confidence level is $21.3
million.
VaR definition (Jorion)
P(Loss>VaR) < 1-c; c is the confidence level
usually being set at 0.99 or 0.95
If c = 99%, then prob of a loss above VaR is

equal 1%
We are 99% confident (or chance) that the
loss will not exceed VaR (e.g., 10 million or
10% of asset value)
Expected Shortfall (or C-
VaR)
C-VaR = expected value (of the losses)
conditional on loss exceeding VaR or any
particular threshold value
C-VaR = E(X l X < VaR)
Also called conditional loss or expected tail

loss (ETL)
VaR vs. Expected Shortfall
VaR is the loss level that will not be exceeded
with a specified probability (confidence level)
Expected Shortfall (or C-VaR) is the expected
loss given that the loss is greater than the VaR
level (also called C-VaR and Tail Loss)
Although expected shortfall is theoretically
more appealing, it is VaR that is used by
regulators in setting bank capital requirements
Two assets with the same VaR can have very
different expected shortfalls
Distributions with the Same VaR but
Different Expected Shortfalls
VaR
VaR
Risk Management and Financial Institutions 3e, Chapter 9,
Desirable properties of a risk
measure (Artzner 1999; Jorion)
Monotonicity: if portfolio 1 has systematically lower
returns than portfolio 2 over all states (portfolio 2
strictly dominates 1), portfolio 1 has higher (downside)
risk (note mean-var & stochastic dominance)
Translation invariance: adding W amount of cash to a
portfolio should reduce its risk by W
Homogeneity: scale up a portfolio by a factor K should
increase its risk by a factor K (assume that the larger
portfolio does not increase liquidity risk)
Sub-additivity (Merged portfolio 1 & 2 has less risk
than risk of 1 plus risk of 2 (diversification benefit)
VaR(1) + VaR(2) > VaR (1+ 2)
Advantages of VaR
It captures an important aspect of risk
in a single number
It is easy to understand
It asks the simple question: “How bad can things
get?” VaR fails to address the extreme value (worst
case scenario); C-VaR (expected loss conditional on
loss exceeding VaR) or expected shortfall is an
improvement
VaR tells you 99% chance the loss is less than X
C-VaR tells you if the VaR is breached, what is the
expected value
Both measures do not indicate the
worst case
scenario; Extreme value
Copyright © John theory
C. Hull 2012 13
Computation steps VaR (Jorion)
Mark to market the current portfolio value (e.g., $100
million); expected return = 0
Measure the standard deviation of the portfolio return
(e.g., 15% p.a.)
Set Time horizon (e.g., 10 trading days)
Set confidence level (e.g., 99%; that translate into 2.33
std deviation for normal dist.)
VaR = $100 m (15%) (10/252)^1/2 (2.33) = $7 m; red term
is std dev of return for the 10-day period
+ve statement: 99% confident that the loss is below $7 m
within a 10 day period; -ve statement: there is a 1%
chance that the loss will exceed $7m
Options, Futures and Other Derivatives, 8th Edition,
Relationship between time and
variance of returns
Variance of return per year = variance of
return per day (number of days)
Variance of return is linear in Time
Nobel prize laureate (Eugene Fama): efficient
market hypothesis EMH
EMH implies that securities price changes as
random walk; iid is stronger than random
walk
The best prediction of the next price is the
current price; the© John
Copyright returns are uncorrelated 15
C. Hull 2012
What if the returns are
correlated? (ch 23?)
If the stock market exhibit some sort of
herding behavior, algorithm trading too)
Market goes up, people follow and expect the
market to go further up
Up market is fuel by further buying
Asset prices blow up!
Bubble

Historical Simulation to Calculate the
One-Day VaR
Create a database of the daily movements in
all market variables.
The first simulation trial assumes that the
percentage changes in all market variables
are as on the first day
The second simulation trial assumes that the
percentage changes in all market variables
are as on the second day
and so on
Historical Simulation continued
Suppose we use 501 days of historical data
(Day 0 to Day 500)
Let vi be the value of a variable on day i
There are 500 simulation trials
The ith trial assumes that the value of the
market variable tomorrow is
vi
v500
vi 1
Example : Calculation of 1-day, 99%
VaR for a Portfolio on Sept 25, 2008 (Table
21.1, page 475)
Index Value ($000s)

DJIA 4,000
FTSE 100 3,000
CAC 40 1,000
Nikkei 225 2,000

Data After Adjusting for
Exchange Rates (Table 21.2, page 475)
Day Date DJIA FTSE 100 CAC 40 Nikkei 225
0 Aug 7, 2006 11,219.38 6,026.33 4,345.08 14,023.44
1 Aug 8, 2006 11,173.59 6,007.08 4,347.99 14,300.91
2 Aug 9, 2006 11,076.18 6,055.30 4,413.35 14,467.09
3 Aug 10, 2006 11,124.37 5,964.90 4,333.90 14,413.32
… …… ….. ….. …… ……
499 Sep 24, 2008 10,825.17 5,109.67 4,113.33 12,159.59
500 Sep 25, 2008 11,022.06 5,197.00 4,226.81 12,006.53

Scenarios Generated (Table 21.3, page 476)
Scenario DJIA FTSE 100 CAC 40 Nikkei 225 Portfolio Loss
Value ($000s) ($000s)
1 10,977.08 5,180.40 4,229.64 12,244.10 10,014.334 −14.334
2 10,925.97 5,238.72 4,290.35 12,146.04 10,027.481 −27.481
3 11,070.01 5,118.64 4,150.71 11,961.91 9,946.736 53.264
… ……. ……. ……. …….. ……. ……..

499 10,831.43 5,079.84 4,125.61 12,115.90 9,857.465 142.535
500 11,222.53 5,285.82 4,343.42 11,855.40 10,126.439 −126.439
11,173.59
Example of Calculation: 11,022.06   10,977.08
11,219.38

Ranked Losses (Table 21.4, page 477)
Scenario Number Loss ($000s)
494 477.841
99% one-
339 345.435
day VaR
349 282.204
329 277.041
487 253.385
227 217.974
131 205.256

Problem with simulation with
historical data
What if history does not repeat itself?
What if the future cannot be represent by the
particular 500 scenarios?
A solution:
Generate scenarios
Wiener process, generalize wiener process
Underlying the process is a normal
distribution which means that it covers every
possible scenario
1-day VaR
Initial portfolio value = 10 m
Standard deviation of return p.a. = sigma
1-day VaR (99%)= 10m sigma / root 252
(2.33) = 253,385
10-day VaR (99%) = 10m sigma / root 252
(root 10) (2.33)
10-day VaR = 1-day VaR (root 10)

The N-day VaR
The N-day VaR for market risk is usually
assumed to be N times the one-day VaR
In our example the 10-day VaR would be
calculated as
10  253,385  801,274
This assumption is in theory only perfectly
correct if daily changes are identically
independent distributed normally ; iid N( )
The assumption implies that variance is linear
in time; related
Options, toOther
Futures, and EMH Derivatives, 8th Edition,
The Model-Building Approach
The main alternative to historical simulation is
to make assumptions about the probability
distributions of the return on the market
variables and calculate the probability
distribution of the change in the value of the
portfolio analytically
This is known as the model building approach
or the variance-covariance approach

Daily Volatilities
In option pricing we measure volatility “per
year”
In VaR calculations we measure volatility “per
day” (assumption: returns are iid or
independently identically distributed)
s year
s day 
252

Daily Volatility continued
Theoretically, sday is the standard deviation of
the continuously compounded return (ln P –
ln P-1) in one day
Return is assumed to be normally distributed
Under the assumption that asset prices
(stock) is lognormal (ln P is normally dist.
Because of limited liability); then a linear
combination of normal variables are also
normal; hence the returns are normal
In practice we assume that it is the standard
deviation of the percentage change in one
day Copyright © John C. Hull 2012 28
Microsoft Example (page 479)
We have a position worth $10 million in
Microsoft shares
The volatility (standard deviation of returns) of
Microsoft is 2% per day (about 32% per year)
16 = 252
32% = 2% 252
We use N=10 (trading days) and X=99
(confidence level)
Microsoft Example continued
The standard deviation of the change in the
portfolio in 1 day is $200,000 (=2% x 10 m.)
The standard deviation of the change in the
value of the portfolio in 10 days is
200,000 10  $632,456

Notice that the 10-day standard deviation is
not equal to 10 times the 1-day standard
deviation (root of 10)
However, the 10-day variance is equal to 10
times the 1-day variance

Microsoft Example continued
We assume that the expected change in the value of
the portfolio is zero (This is OK for short time
periods); if it is not then create the standardized
normal variables = x-mean/sigma
We assume that the change in the value of the
portfolio is normally distributed
Since N(–2.33)=0.01, the VaR (c=99%,T=10 days)
2.33  632,456  $1,473,621

interpretations
We are 99% confident that the loss will not
exceed $1.473 m in a 10-days period (2
weeks)
There is a 1% chance that the minimum loss
is $1.473 m (cautionary remark for those who
are extremely risk-averse)
Questions the C-VaR (expected shortfall) and
extreme values
AT&T Example (page 480)
Consider a position of $5 million in AT&T
The daily volatility of AT&T is 1% (approx
16% per year) 1% 252
The S.D per 10 days is
50,000 10  $158,144
The VaR (c=99%, T=10 days)
158,114  2.33  $368,405

Portfolio
Now consider a portfolio consisting of both
Microsoft and AT&T
Assume that the returns of AT&T and
Microsoft are bivariate normal
Suppose that the correlation between the
returns

S.D. of Portfolio
A standard result in statistics states that
s X +Y  s 2X + sY2 + 2rs X s Y
In this case sX = 200,000 and sY = 50,000 and r =

0.3. The standard deviation of the change in the
portfolio value in one day is therefore 220,227
Note that if r = 0, then variance of X+Y portfolio =
VaR(X+Y)=root of [VaR(X) + VaR(Y)]; if r = 1, then
the portfolio standard deviation = std dev of X + std
dev of Y
VaR for Portfolio
The 10-day 99% VaR for the portfolio is
220,227  10  2.33  $1,622,657
The benefit of diversification is
(1,473,621+368,405)–1,622,657=$219,369
Sub-additivity:
What is the incremental effect of the AT&T
holding on VaR?

Markowitz Result for Variance of
Return on Portfolio
n n
Variance of Portfolio Return   r
i 1 j 1
ij wi w j s i s j
wi is weight of ith instrument in portfolio

σ i2 is variance of return on ith instrument
in portfolio
ρij is correlation between returns of ith
and jth instruments

Markowitz Result for Variance of Return on
Portfolio n n
Variance of Portfolio Return P   r ij wi Pw j Ps is j
2
i 1 j 1
n n
Variance of Portfolio Return P  P 2 2
 r
i 1 j 1
ij wi w js is j
n n
Standard deviation Portfolio Return P  P  r
i 1 j 1
ij wi w js is j
Standard deviation Portfolio Dollar Return  P (SD of port retu

wi is weight of ith instrument in portfolio
σ i2 is variance of Options,
returnFutures,
on iand
thOther
instrument
Derivatives, 8th Edition,
Relationship between variance of return &
variance of dollar return
Variance of dollar portfolio return = PP
variance of portfolio return
Standard deviation dollar portfolio return =
square root of variance of dollar portfolio
return
P (standard deviation of portfolio return)
Why dollar amount?
VaR is a dollar amount for margin requirement
and for regulation of bank capital (Basel I,II,III)
The Linear Model
This assumes
• The daily change in the value of a portfolio is
linearly related to the daily returns from
market variables (of course if the portfolio
contains only equity stock)
• Problem is what if the assets consist of
options (gamma, vega, time decay)
• The returns from the market variables are
normally distributed
Risk management vs Investment
Investment finance compares the risk and
return from different assets from the
perspective of investors.
Risk management: view of institution
Clearing house by way of novation assumes
the position of both long and short. Clearing
house charge the members margin to
safeguard the clearing house solvency
Brokerage in turn charge traders margin
deposition and deposit the money with the CH
to prevent clients’ default
VaR Result for Variance of Portfolio
Value ($ in asset i=ai = wiP)
S
n
P   a i xi x 
i 1
n n S
s   r ij a i a j s i s j
2
P
i 1 j 1
n
s 2P   a s i2 + 2 r ij a i a j s i s j
2
i
i 1 i j
s i is the daily volatility of ith instrument (i.e., SD of daily return)

s P is the SD of the change in the portfolio value per day

Alternative Expressions for sP2
page 328
n n
s 2P   cov ij a i a j
i 1 j 1
s 2P  α T Cα
where α is the column vector whose ith

element is αi and α T is its transpose
Risk Management and Financial Institutions 3e, Chapter

15, Copyright © John C. Hull 2012 44
Benefit of diversification - Special Case 1
(zero correlations; Samuelson) n n
Variance of Portfolio Return   rij wi w j si s j
i 1 j 1
wi is weight of ith asset in portfolio

si2 is variance of return on ith asset
in portfolio
rij is correlatio n between returns of ith
and jth assets
Risk Management and Financial Institutions 3e, Chapter
15, Copyright © John C. Hull 2012 45
Covariance Matrix (vari = covii)
 var1 cov12 cov13  cov1n 

 
 cov 21 var2 cov 23  cov 2 n 
C   cov 31 cov 32 var3  cov 3n 
 
      
 cov cov n3  varn  
 n1 cov n 2
covij = rij si sj where si and sj are the SDs of the daily returns
of variables i and j, and rij is the correlation between them
Alternative Expressions for sP2
pages 482-483
n n
s   cov ij a i a j
2
P
i 1 j 1
s 2P  α T Cα
where α is the column vector whose ith

element is αi and α T is its transpose

Alternatives for Handling
Interest Rates (duration &
convexity)
Duration approach: Linear relation between
P and y but assumes parallel shifts)
Cash flow mapping: Cash flows are mapped
to standard maturities and variables are zero-
coupon bond prices with the standard
maturities
Principal components analysis: 2 or 3
independent shifts with their own volatilities

When Linear Model Can be Used?
Portfolio of stocks
Portfolio of bonds (but beware of convexity)
Forward contract on foreign currency
Interest-rate swap

The Linear Model and Options
Consider a portfolio of options dependent on
a single stock price, S. If d is the delta of the
option, then it is approximately true that
P
d
S
Define
S
x 
S
Option price change is driven by stock price
movement
What drives what?
Linear thinking (cause and effect): A Derivative is written against
an asset S
Price change of the derivatives (futures, call, and put options) is
driven by movement of the underlying asset S
However, what about the statement that the market movement
is trigger by futures price change?
S and F are perfectly correlated; S and F move in perfect
unison; in a perfect market, cannot tell which one is the driver;
no trading opportunity
S moves ahead of F; trade F after seeing S move
F moves ahead of S (norm); informed traders trade derivatives
ahead of S. trade S after seeing F moves; the question is how
long and how much ahead? 1/10 of a second, 1 second, 3-
minutes, how much; 1 bp, 10 bps that determine whether the
trade is viable after deducting
Options, Futures, costs and
and Other Derivatives, fees
8th Edition,
Linear Model and Options
continued (equations 20.3 and 20.4)
Then
P  d S  Sd x
Similarly when there are many underlying

market variables
P  S d
i
i i x i
where di is the delta of the portfolio with

respect to the ith asset

Example
Consider an investment in options on Microsoft and
AT&T. Suppose the stock prices are 120 and 30
respectively and the deltas of the portfolio with
respect to the two stock prices are 1,000 (deltas of
Microsoft options) and 20,000 (deltas of AT&T
options) respectively; 1 delta = 1 share
As an approximation
P  120 1,000x1 + 30  20,000x2

where x1 and x2 are the percentage changes in the
two stock prices. If AT&T call has 0.5 delta per call,
that means we hold 40,000 call options of AT&T
VaR for option portfolios
Consider a portfolio of options on a single
asset. The delta of the portfolio is 12, the
value of the asset is $10, and the daily
volatility of the asset is 2%.
Then the standard deviation of daily change
in the portfolio’s value is $2.4=$10*2%*12
The 1-day 95% VaR for the portfolio is
54
How to obtain VaR with delta P
Given the quadratic form in estimating
changes in the value of the option portfolio
Two approaches
1. Simulation with historical return data
2. Monte Carlo simulation by using random
draw from a normal distribution (refer to the
ppt for the Black-Scholes-Merton basic
assumption on the return generating
process: geometric Brownian motion
But the distribution of the daily return
on an option is not normal
The linear model fails to capture skewness in the

probability distribution of the portfolio value.
Or the delta is constant

Impact of gamma (and skewness) on the
return distribution (Figure 21.4, page 486)
Positive Gamma Negative Gamma

Translation of Asset Price Change to Price
Change for Long Call (Figure 21.5, page 487)
Long
Call
Asset Price

Translation of Asset Price Change to Price
Change for Short Call (Figure 21.6, page 487)
Asset Price
Short
Call
Quadratic Model
For a portfolio dependent on a single stock

price it is approximately true that
1
P  dS +  (S ) 2
2
this becomes
1 2
P  Sd x + S  (x) 2
2

Suppose the gamma of the portfolio is -2.6
the quadratic relationship between the
change in the portfolio value and the
percentage change in the underlying asset
price in one day.
=
=

Quadratic Model continued
With many market variables we get an
expression of the form
n n
1
P   S i di xi +  S i S j  ij xi x j
i 1 i 1 2
where
P 2
 P
di   ij 
Si Si S j
But this is much more difficult to work with

than the linear model
Refer to historical simulation
above
Historical simulation: simulation with historical
return data
If there are 10 different options written on 10
different assets
Collect the historical price series of the 10
assets
Calculate the historical returns
Use the returns to produce the distribution of
the option portfolio value change
Monte Carlo Simulation (page 488-489)
To calculate VaR using MC simulation (using
random number generator) we
• Value portfolio today
• Sample once from the multivariate distributions
of the xi
• Use the xi to determine market variables at
end of one day (obtain z and multiply that by
root of dt); 1-day, z (root of 1/252)
• Revalue the portfolio at the end of day

Monte Carlo Simulation continued
Calculate P
Repeat many times to build up a probability
distribution for P (bootstrapping, raw)
VaR is the appropriate fractile of the
distribution times square root of N
For example, with 1,000 trial the 1 percentile
is the 10th worst case.

Speeding Up Monte Carlo
Use the quadratic approximation to calculate
P

Speeding up Calculations with
the Partial Simulation Approach
Use the approximate delta/gamma
relationship between P and the xi to
calculate the change in value of the portfolio
This can also be used to speed up the
historical simulation approach

Comparison of Approaches
Model building approach assumes normal
distributions for market variables. It tends to
give poor results for low delta portfolios. Of
course may include a jump variable to
capture the potential discrete dumps
(improvement is marginal, see Chan, Cheng,
and Fung 2011)
Historical simulation lets historical data
determine distributions, but is computationally
slower. Major problem, the history does not
repeatOptions,
itself; remedy: machine learning
Futu(res, and Other Derivatives, 8th Edition,
Stress Testing
This involves testing how well a portfolio
performs under extreme but plausible market
moves
Scenarios can be generated using
Historical data
Analyses carried out by economics group
Senior management

Back-Testing
Tests how well VaR estimates would have
performed in the past
We could ask the question: How often was
the actual 1-day loss greater than the
99%/1- day VaR?

Principal Components Analysis
for Interest Rates
The first factor is a roughly parallel shift
(83.1% of variation explained)
The second factor is a twist (10% of
variation explained)
The third factor is a bowing (2.8% of
variation explained)

The First Three Principal
Components (Figure 21.7, page 492)

Standard Deviation of Factor
Scores
PC1 PC2 PC3 PC4 …..
17.49 6.05 3.10 2.17 ….

Using PCA to Calculate VaR (page
493)
Example: Sensitivity of portfolio to rates ($m)

1 yr 2 yr 3 yr 4 yr 5 yr
+10 +4 -8 -7 +2
Sensitivity to first factor is from factor loadings:

10×0.32 + 4×0.35 − 8×0.36 − 7 ×0.36 +2 ×0.36
= −0.08
Similarly sensitivity to second factor = − 4.40
Using PCA to calculate VaR
continued
As an approximation
P  0.08 f1  4.40 f 2
The f1 and f2 are independent
The standard deviation of P (from Table
20.4) is
0.082 17.492 + 4.402  6.052  26.66
The 1 day 99% VaR is 26.66 × 2.33 = 62.12


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Chapter 21

Options, Futures, and Other Derivatives, 8th Edition,

Options, Futures, and Other Derivatives, 8th Edition,

Then z = u-m/s has a standard normal

Options, Futures, and Other Derivatives, 8th Edition,

Options, Futures, and Other Derivatives, 8th Edition,

If c = 99%, then prob of a loss above VaR is

C-VaR = E(X l X < VaR)

Also called conditional loss or expected tail

Options, Futures, and Other Derivatives, 8th Edition,

Index Value ($000s)

Options, Futures, and Other Derivatives, 8th Edition,

Options, Futures, and Other Derivatives, 8th Edition,

1 10,977.08 5,180.40 4,229.64 12,244.10 10,014.334 −14.334

2 10,925.97 5,238.72 4,290.35 12,146.04 10,027.481 −27.481

3 11,070.01 5,118.64 4,150.71 11,961.91 9,946.736 53.264

… ……. ……. ……. …….. ……. ……..

500 11,222.53 5,285.82 4,343.42 11,855.40 10,126.439 −126.439

Options, Futures, and Other Derivatives, 8th Edition,

Options, Futures, and Other Derivatives, 8th Edition,

Options, Futures, and Other Derivatives, 8th Edition,

Options, Futures, and Other Derivatives, 8th Edition,

Options, Futures, and Other Derivatives, 8th Edition,

Options, Futures, and Other Derivatives, 8th Edition,

Options, Futures, and Other Derivatives, 8th Edition,

2.33  632,456  $1,473,621

Options, Futures, and Other Derivatives, 8th Edition,

Options, Futures, and Other Derivatives, 8th Edition,

Options, Futures, and Other Derivatives, 8th Edition,

In this case sX = 200,000 and sY = 50,000 and r =

Options, Futures, and Other Derivatives, 8th Edition,

wi is weight of ith instrument in portfolio

Options, Futures, and Other Derivatives, 8th Edition,

Standard deviation Portfolio Dollar Return  P (SD of port retu

s i is the daily volatility of ith instrument (i.e., SD of daily return)

Options, Futures, and Other Derivatives, 8th Edition,

where α is the column vector whose ith

Risk Management and Financial Institutions 3e, Chapter

wi is weight of ith asset in portfolio

 var1 cov12 cov13  cov1n 

where α is the column vector whose ith

Options, Futures, and Other Derivatives, 8th Edition,

Options, Futures, and Other Derivatives, 8th Edition,

Options, Futures, and Other Derivatives, 8th Edition,

Similarly when there are many underlying

where di is the delta of the portfolio with

Options, Futures, and Other Derivatives, 8th Edition,

P  120 1,000x1 + 30  20,000x2

The linear model fails to capture skewness in the

Options, Futures, and Other Derivatives, 8th Edition,

Positive Gamma Negative Gamma

Options, Futures, and Other Derivatives, 8th Edition,

Options, Futures, and Other Derivatives, 8th Edition,

For a portfolio dependent on a single stock

Options, Futures, and Other Derivatives, 8th Edition,

Options, Futures, and Other Derivatives, 8th Edition,

But this is much more difficult to work with

Options, Futures, and Other Derivatives, 8th Edition,

Options, Futures, and Other Derivatives, 8th Edition,

Options, Futures, and Other Derivatives, 8th Edition,

Options, Futures, and Other Derivatives, 8th Edition,

Options, Futures, and Other Derivatives, 8th Edition,

Options, Futures, and Other Derivatives, 8th Edition,